Budget 2020 Expectations for deposit insurance: Under the DICGC Act, every depositor per bank is insured up to a maximum of Rs 1 lakh including the principal and interest amount.
Union Budget 2020 Expectations for deposit insurance: Budget 2020 is to be presented by the Finance Minister Nirmala Sitharaman on February 1, 2020, which will be her second Union Budget. Some of the recent events in the banking sector had once again raised concerns about the safety of depositors money in the banks. One major issue related to the safety of depositors money in the banking sector may, therefore, be taken up by the FM in her Budget speech 2020.
In the backdrop of the bank crisis in the Punjab and Maharashtra Cooperative (PMC) Bank, Mumbai, Maharashtra and lately the restrictions imposed by RBI on cash withdrawals by customers of Sri Gururaghavendra Sahakara Bank Niyamitha (SGRBBN), an Bengaluru, Karnataka based Urban Co-operative bank, the government is expected to take steps in instilling confidence to the bank depositors. Inherently, the banking sector is well regulated and financially sound to withstand global headwinds but the common man is more concerned about his or her own savings.
Currently, the bank deposits are insured but the limit is perceived to be too low. Under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, every depositor in a bank is insured up to a maximum of Rs 1 lakh including the principal and interest amount. The limit is the aggregate of all bank branches of the same bank but if you have deposits with more than one bank, the deposit insurance limit will apply separately to the deposits in each bank. The limit of Rs 1 lakh was set in May 1993.
As far as co-operative banks are concerned, at present, all co-operative banks other than those from the States of Meghalaya, and the Union Territories of Chandigarh, Lakshadweep and Dadra and Nagar Haveli are covered under the deposit insurance system of DICGC.
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Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI had earlier remarked that “There is a dire need to revisit the insurance coverage of the bank deposits. In particular, the current upper limit of Rs 1 lakh per depositor, we believe, has outlived its shelf life and there is a need to revisit it. “The deposit insurance coverage is for all the money lying in a savings account, current account, fixed deposits etc. Dr. Ghosh had suggested there should be two categories for the insurance coverage as follows:
1) Desirable coverage of at least Rs 1 lakh for savings bank deposits, and
2) Desirable coverage of at least Rs 2 lakh for Term Deposits or fixed deposits.
Bank deposits including fixed deposits are a popular investment option with senior citizens. For meeting regular income needs, several senior citizens put their retirement money into bank FDs. Dr. Ghosh adds, “There should also be a separate provision for senior citizens. This revision in DICGC coverage becomes all the more desirable in the Indian context, where senior citizens or retired people have no social security in place and mostly keep fixed deposits for earning interest income.”