Union Finance Minister Nirmala Sitharaman has proposed to hike the bank deposit insurance in scheduled commercial banks to Rs.5 lakh per depositor in the Budget 2020.
There is a robust mechanism to monitor the health of all scheduled commercial banks and we want to assure depositors that their deposits are absolutely safe,” Finance Minister Niramala Sitharaman said while presenting in the Union Budget for 2020-21.
Earlier, the insurance amount was only Rs.1 lakh. Currently, as per RBI guidelines, deposits with all commercial banks and cooperative banks are insured under the Deposit Inusrance and Credit Guarantee Corporation (DICGC). Only Primary Cooperative Socieites are not covered under DICGC. According to the new proposal, each depositor will get Rs.5 lakh insurance safety.
Since 2005, banks have been paying a flat-fee premium rate of 10 paise for every Rs 100 worth of deposits to maintain an insurance cover of Rs 1 lakh per depositor. With the extent of insurance raised, banks would have to increase the premium payment, which would eventually be passed on to customers in some form.