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    Government mulls raising insurance cover on bank deposits to above Rs 1 lakh: Nirmala Sitharaman

    Synopsis

    FM said the government will bring legislations on raising bank deposit cover from the current Rs 1 lakh.

    ANI
    The finance minister also said the government has no plans to cut spending on welfare schemes and will encourage all the departments of the Union government to spend entire funds provided in the Budget.
    NEW DELHI: Finance Minister Nirmala Sitharaman on Friday said the government will bring legislations on raising insurance cover on bank deposits from the current Rs 1 lakh and regulating multi-state cooperative banks amidst a crisis in PMC Bank affecting lakhs of depositors.

    These legislations will be brought during the Winter Session of Parliament starting Monday, the minister told reporters here.

    "Work is on and we shall go to the Cabinet for approval to introduce a legislation in winter session. The legislation will amend the necessary Acts and the laws to make sure that banking functions undertaken by cooperatives sector will be brought under the Banking Regulation Act for complying with prudential norms," she said.

    Unless the prudential norms are applied, many of the things that are emerging in the light of the Punjab and Maharashtra Cooperative (PMC) Bank crisis will never be addressed and this legislation will ensure that no PMC like case happens in the future, she added.

    With regard to deposit guarantee insurance limit hike, Sitharaman said it may not be part of cooperative bank legislation but part of some other laws.

    "We might want to increase the minimum amount of Rs 1 lakh (deposit cover). The government plans to bring this (legislation) during the winter session," she said.

    These legislations assume significance in the wake of scam in the PMC Bank affecting lakhs of customers who are facing difficulties in withdrawing their entire money due to restrictions imposed by the Reserve Bank of India.

    At present, bank depositors get an insurance cover of Rs 1 lakh on their amount by the Deposit Insurance and credit Guarantee Corporation.

    Deposit insurance is static at Rs 1 lakh since 1993. As much as 90 per cent of the accounts had that much or less amount when this limit was raised to Rs 1 lakh.

    The Raghuram Rajan Committee on Financial Sector Reforms 2009 had recommended strengthening the capacity of the Deposit Insurance and Credit Guarantee Corporation, a more explicit system of prompt, corrective action, and making deposit insurance premia more risk-based.

    With regard to GST revenue, the finance minister said that the collection in November will improve and will definitely be good.

    She expressed hope that the country will achieve USD 5 trillion economy goal by 2024-25 and the government is taking steps to achieve that target.

    On disinvestment, the finance minister said the process is moving very well.

    "Strategic divestment, residual divestment is moving forward comfortably and I am very confident that at least some of them will be done during the year," she said.

    "Things are also moving on Air India and road shows are happening at various places," she added.

    Sitharaman said the revised estimate meetings have started and a clear picture on government finances would be known in the next few weeks.

    Amidst pressure on the revenue collection, she said the government has no plans to cut spending on welfare schemes.

    The government is encouraging all the departments of the Union government to spend entire funds provided in the Budget, she added.
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    26 Comments on this Story

    Sridhar N N340 days ago
    I want 100% of the amount in FD’s to be guaranteed. Why should my life savings be robbed by scamstors from the business and political world ?
    Nagesh VN342 days ago
    Deposit Ins - More than amount, it is sovereign guarantee that matters:-
    A glance at the information available for 15-16 reveals a startling info about Insurance premia paid by Banks vis-a-vis the claims:
    Dep Insurance Premia paid by Banks to DIF during year - 15-16 is: [Rs millions]
    Com Bks Coop Bk Total
    Premia 85,512 6,483 91,995
    Claim Settled 0.00 471 471
    Since inception of Dep Insurance, total claim settled in respect of 27 Commercial Banks is a minuscule -Rs.2,959 million. The premia paid by Com Banks during the year 15-16, for one year alone is Rs. 85512 millions. We can imagine what may be the premia that is was paid commercial banks for decades and decades.
    Reserve and Surplus in respect of Dep Ins Fund stands at Rs.5,48,419.78 millions!!
    As no commercial bank fails normally, probability of settlement of claims is remote.
    Major beneficiaries are Coop Banks. As such functioning of coop banks to be relooked and more particularly to depolitice them.Their heads should be from commercial banks.
    Govt should consider:
    a. Rising coverage to Rs.10 lakhs
    b. Additional safety for savings pertaining to superannuation funds, small depositors.
    c. Per depositor cap to be removed as premia is paid on total deposit, not per borrower
    Nagesh VN
    Bengaluru
    Eddie 344 days ago
    all deposits with banks should be 100% insured. for most of retired pvt sector and returning NRIs the interest on these deposits is mostly their only source of income. they do not have monthly pensions like government employees. if they loose their savings it would mean starvation and suicide for the majority of retirees.
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