Latest News

  • Home
  • National
  • Bank deposits to get doubly safer: This clause in FRDI bill is music to the ears of depositors
Bank deposits to get doubly safer: This clause in FRDI bill is music to the ears of depositors
Tuesday, November 19, 2019 IST
Bank deposits to get doubly safer: This clause in FRDI bill is music to the ears of depositors

The latest move comes at a time when fraud-hit Punjab and Maharashtra Co-operative Bank is facing a grave crisis and customers have been demanding their entire money back, apart from lifting the daily withdrawal curbs.

 
 

The government is considering raising the insurance cover for bank deposits to anywhere between Rs 2 lakh and Rs 3 lakh from the current level of Rs 1 lakh under a modified Financial Resolution and Deposit Insurance (FRDI) law, a source told FE.  The finance ministry is also debating whether the minimum insured amount can be allowed to be withdrawn by the depositors of a troubled bank even when it is continuing operations as a going concern, said the source. Under the extant rules, depositors are entitled to the insured amount of Rs 1 lakh only when the bank is liquidated, he added.
 
The latest move comes at a time when fraud-hit Punjab and Maharashtra Co-operative Bank is facing a grave crisis and customers have been demanding their entire money back, apart from lifting the daily withdrawal curbs.
 
“The deposit insurance cover could be at least doubled. There is also a thumb rule in some countries that such a cover should be at least the double of the per capita GDP. This possibility is also being looked at. So the cover can be hiked up to Rs 3 lakh as well. A final decision will be made soon,” said the source. The country’s per capita GDP was Rs 1,42,719 in FY19.
 
 
After a meeting with chiefs of state-run banks on October 14, finance minister Nirmala Sitharaman had said the government would soon introduce the revised FRDI Bill in Parliament and that there were discussions in the government to raise the cover on deposits. The Bill is still in the works.
 
The government has kept the deposit cover unchanged at Rs 1 lakh since May 1993, when it was raised from Rs 30,000 after the security scam in 1992 had led to the liquidation of Bank of Karad in Maharashtra. The hike then was aimed at placating angry and concerned depositors of this private bank so that a run on even other banks could be avoided.
 
Banking analysts say there is no hard rule for deposit insurance in India, although there are two thumb rules, based on international experiences. First, the cover should be double the per capita GDP. Second, it must cover 80% of the number of depositors fully but only 20% of the value of deposits, which is also known as the ‘80-20 rule’.
 
According to the Reserve Bank of India’s (RBI’s) latest data, deposit insurance covers 92% of the total number of accounts in India but only 28% of the total deposits with the banking system.
 
In its 2018-19 annual report, the central bank said: “With the current limit of deposit insurance in India at Rs 1 lakh, the number of fully protected accounts stood at 200 crore at the of end-March 2019, which constituted 92% of the total number of accounts, as against the international benchmark of 80%.” As of March 2019, the number of registered insured banks in India stood at 2,098 —157 commercial banks and 1,941 cooperative banks.
 
However, analysts say although the current cover of Rs 1 lakh satisfies the so-called “80-20 rule”, such an international experience should not ideally be applicable to India. Unlike in the West, the high incidence of fully-covered accounts is mainly due to the aggressive opening of small accounts, especially under the Jan Dhan scheme, where the deposit per customer is typically low. In fact, according to the 2018 International Association of Deposit Insurers Survey, India was ranked 102nd out of 115.
 
Interestingly, the Report of the Committee on Customer Service in Banks of the RBI had in 2011 suggested that the cover be raised dramatically to at least Rs 5,00,000 to draw more people to the banking fold.
 

 
 
 
 
 

Related Topics

 
 
 

Trending News & Articles

 Article
Here is the full list of 827 porn websites banned by the DoT

While the Uttarakhand High Court has asked to block 857 websites, the Ministry of Electronics and IT (Meity) found 30 portals without any pornographic content. ...

Recently posted . 61K views . 1 min read
 

 Article
Class XII Boys Raped 16-Year-old in Dehradun School After Watching Porn on Phone: Police

The four boys as well as five school officials, including the director and principal, were arrested after the incident. The minors were presented before the Juvenil...

Recently posted . 8K views . 1 min read
 

 Article
Sept 27,2001 Rahul Gandhi and his girl friend Veronique,was arrested in Logan airport in Boston

Rahul was having an Italian passport and was carrying suitcase full of dollars. Some say it was about was it $2 million. Rahul and his girl friend was th...

Recently posted . 7K views . 7 min read
 

 Article
TOP 10 GYM EQUIPMENT BRANDS IN INDIA 2017

True – Tr...

Recently posted . 6K views . 83 min read
 

 
 

More in National

 Article
Ajit Doval's Street Chat With Kashmiris Amid Lockdown

Ajit Doval, who flew to Kashmir on Monday, has been delivering situation reports from the ground to Delhi.  

Recently posted. 564 views . 0 min read
 

 Article
Skip Kufri - Here Are 5 Reasons Why You Should Head To Narkanda Instead!

Offering magnificent views and a pleasant stay amidst the beautiful orchards, Narkanda is a heavenly escape from the hustle of the city, located about 63 Kms from...

Recently posted. 978 views . 2 min read
 

 Article
Vigilantes attack truck taking cows from Rajasthan to Tamil Nadu

A crowd of no less than 50 individuals captured five trucks close to Rajasthan's Barmer late on Sunday, assaulting drivers and endeavoring to set fire to the ve...

Recently posted. 598 views . 15 min read
 

 Reviews
Top 10 Schools in Noida



Recently posted . 1K views . 57 min read
 

 Reviews
The top players in the Indian real estate market



Recently posted . 1K views . 34 min read
 

 Article
How to get a driving license (DL) without any test at RTO

These training centres will be equipped with simulators and dedicated driving test track to provide high quality training to candidates  

Recently posted. 674 views . 1 min read
 

 Article
Pakistan Should Have Returned Kulbhushan Jadhav to India 'at Right Price', Says Ex-ISI Chief

In a book titled ‘The Spy Chronicles: RAW, ISI and the Illusion of Peace’, former ISI chief Muhammad Asad Durrani and ex-RAW chief AS Dulat share anecdo...

Recently posted. 665 views . 1 min read
 

 
 
 

   Prashnavali

  Thought of the Day

"The whole secret of a successful life is to find out what is one's destiny to do, and then do it."
Henry Ford

Be the first one to comment on this story

Close
Post Comment
Shibu Chandran
2 hours ago

Serving political interests in another person's illness is the lowest form of human value. A 70+ y old lady has cancer.

November 28, 2016 05:00 IST
Shibu Chandran
2 hours ago

Serving political interests in another person's illness is the lowest form of human value. A 70+ y old lady has cancer.

November 28, 2016 05:00 IST
Shibu Chandran
2 hours ago

Serving political interests in another person's illness is the lowest form of human value. A 70+ y old lady has cancer.

November 28, 2016 05:00 IST
Shibu Chandran
2 hours ago

Serving political interests in another person's illness is the lowest form of human value. A 70+ y old lady has cancer.

November 28, 2016 05:00 IST


ads
Back To Top