<p class="title">In a move that could better protect the interest of depositors, the government is planning to increase the deposit insurance cover to more than Rs 2 lakh for individual bank accounts, if a lender (banks or other financial institutions) collapses or its licence is cancelled by the Reserve Bank of India.</p>.<p class="bodytext">The upward revision in the insurance cover could come through the re-introduction of a revamped Financial Resolution and Deposit Insurance (FRDI) Bill in Parliament in the winter session beginning next week.</p>.<p class="bodytext">The last revision was effected in 1993 when the cover was increased from Rs 30,000 to Rs 1 lakh.</p>.<p class="bodytext">“It is a long-pending demand by the depositors. The move will encourage individuals to keep a better part of their deposits in banks and help them retain their faith in them,” an official privy to the decision told <span class="italic">DH</span>.</p>.<p class="bodytext">The revision comes close on the heels of a near-collapse of the Punjab and Maharashtra Cooperative Bank, which has shaken the faith of depositors.</p>.<p class="bodytext">Incidentally, the last time when the deposit insurance cover was revised 26 years ago, the trigger came from a Maharashtra-based private lender. The Karad Bank’s liquidation following a security scam led to a hike in the cover by over three times. The decision was taken to pacify depositors so that a run on banks could be avoided.</p>.<p>Thereafter, an RBI panel in 2011 had recommended a five-time hike in the insurance cover to Rs 5 lakh per depositor so as to encourage a majority of individuals to keep all their deposits in banks. But it was not implemented.</p>.<p>The government had introduced the FRDI Bill in the Lok Sabha in 2017 but it was withdrawn a year later after an uproar in and outside Parliament over a controversial 'bail-in' clause, which suggested that depositors money could be used by a failing bank or a financial institution to stay afloat.</p>
<p class="title">In a move that could better protect the interest of depositors, the government is planning to increase the deposit insurance cover to more than Rs 2 lakh for individual bank accounts, if a lender (banks or other financial institutions) collapses or its licence is cancelled by the Reserve Bank of India.</p>.<p class="bodytext">The upward revision in the insurance cover could come through the re-introduction of a revamped Financial Resolution and Deposit Insurance (FRDI) Bill in Parliament in the winter session beginning next week.</p>.<p class="bodytext">The last revision was effected in 1993 when the cover was increased from Rs 30,000 to Rs 1 lakh.</p>.<p class="bodytext">“It is a long-pending demand by the depositors. The move will encourage individuals to keep a better part of their deposits in banks and help them retain their faith in them,” an official privy to the decision told <span class="italic">DH</span>.</p>.<p class="bodytext">The revision comes close on the heels of a near-collapse of the Punjab and Maharashtra Cooperative Bank, which has shaken the faith of depositors.</p>.<p class="bodytext">Incidentally, the last time when the deposit insurance cover was revised 26 years ago, the trigger came from a Maharashtra-based private lender. The Karad Bank’s liquidation following a security scam led to a hike in the cover by over three times. The decision was taken to pacify depositors so that a run on banks could be avoided.</p>.<p>Thereafter, an RBI panel in 2011 had recommended a five-time hike in the insurance cover to Rs 5 lakh per depositor so as to encourage a majority of individuals to keep all their deposits in banks. But it was not implemented.</p>.<p>The government had introduced the FRDI Bill in the Lok Sabha in 2017 but it was withdrawn a year later after an uproar in and outside Parliament over a controversial 'bail-in' clause, which suggested that depositors money could be used by a failing bank or a financial institution to stay afloat.</p>
