Govt is considering raising the deposit insurance limit above Rs 5 lakh amid the New India Co-operative Bank scam crisis.
New India Co-operative Bank
In the wake of the New India Co-operative Bank crisis, the Indian government is actively considering increasing the deposit insurance cover from Rs 5 lakh. This move comes days after the Reserve Bank of India (RBI) took stern action against the bank, superseding its board and imposing several restrictions. The Department of Financial Services Secretary, M Nagaraju, confirmed that the matter is under consideration. Once a decision is made, it will be promptly notified.
The RBI took swift action against the bank, based in Mumbai, due to its ongoing financial troubles. Customers faced immense difficulty as they were barred from withdrawing funds, applying for new loans, or making investments. As a result, long queues were seen outside the bank’s branches, with anxious depositors attempting to access their funds. Despite this, Nagaraju refrained from commenting further on the status of the bank, leaving the matter to the RBI for resolution.
Read More: Ex-General Manager Of New India Co-operative Bank Under Investigation For Rs 122-crore Fraud: Police
India introduced its deposit insurance scheme back in 1962. This deposit insurance helped the bank to become second country in the world to do so after the US. Under the current system, depositors are eligible to claim insurance on their deposits up to Rs 5 lakh from the Deposit Insurance and Credit Guarantee Corporation (DICGC), after verification.
In February 2020, DICGC increased the coverage limit from Rs 1 lakh to Rs 5 lakh. This offered more protection to small depositors. However, the recent crisis at New India Co-operative Bank has raised concerns over the adequacy of this limit, leading the government to explore the possibility of a higher insurance ceiling.
Read More: RBI Supersedes New India Cooperative Bank’s Board For One Year
Amid the unfolding crisis, the Mumbai police have arrested Hitesh Mehta, the General Manager and Head of Accounts at New India Co-operative Bank, for allegedly embezzling a whopping Rs 122 crore. Mehta was questioned for hours by the Economic Offences Wing (EOW) before his arrest. He is set to appear in court soon.
While the RBI is handling the crisis at the New India Co-operative Bank, depositors remain on edge. The government’s decision to consider raising the insurance limit may offer some relief to those affected by this incident. However, the fate of the bank is still uncertain. The authorities have yet to make any definitive statements about the next steps.
