The government of India is actively considering an increase in the deposit insurance limit, currently set at Rs 5 lakh. This comes in response to recent concerns over bank scams. It is particularly following the exposure of the New India Co-operative Bank scam. Deposit Insurance Limit Under Review The Department of Financial Services has confirmed that the government of India is evaluating a potential hike in the deposit insurance limit. M Nagaraju, Secretary of the department, announced this during a press conference with Finance Minister Nirmala Sitharaman. Nagaraju emphasized that […]
India Considers Raising Deposit Insurance Limit Amid Bank Scam Concerns India Considers Raising Deposit Insurance Limit Amid Bank Scam Concerns India Considers Raising Deposit Insurance Limit Amid Bank Scam Concerns
The government of India is actively considering an increase in the deposit insurance limit, currently set at Rs 5 lakh. This comes in response to recent concerns over bank scams. It is particularly following the exposure of the New India Co-operative Bank scam.
The Department of Financial Services has confirmed that the government of India is evaluating a potential hike in the deposit insurance limit. M Nagaraju, Secretary of the department, announced this during a press conference with Finance Minister Nirmala Sitharaman. Nagaraju emphasized that the government is reviewing the proposal and will notify the public once a decision is made. However, he avoided commenting on the specific details of the New India Co-operative Bank issue. He stated that the Reserve Bank of India (RBI) is overseeing the situation.
Deposit insurance protects bank customers in the event a financial institution collapses. The Deposit Insurance and Credit Guarantee Corporation (DICGC) handles this coverage, which is funded by premiums paid by banks. The DICGC has been especially active in covering depositors of cooperative banks in past cases of fraud or collapse.
In 2020, following the PMC Bank scam, the deposit insurance limit was increased from Rs 1 lakh to Rs 5 lakh. The potential for further raising this limit comes in the wake of recent banking frauds that have raised public concerns about the security of their deposits.
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In light of recent events, Economic Affairs Secretary Ajay Seth reassured the public about the regulatory oversight of cooperative banks. He stated that cooperative banks operate under strict RBI regulations and that the overall sector remains stable. Seth stressed that one fraudulent case should not undermine the credibility of the entire cooperative banking system. He pointed out that it is the responsibility of the regulator to act against any fraudulent activity.
The New India Co-operative Bank scam came to light after an inspection revealed that Rs 122 crore in cash was missing from the bank’s records. Investigations have pointed to the bank’s general manager for finance, Hitesh Mehta, who allegedly transferred a significant portion of the missing funds to a local builder. The case is currently under investigation, and authorities are taking action to uncover the full details.
Despite the scandal, the DICGC insurance scheme will cover 90% of the bank’s 130,000 depositors. Most depositors are set to receive the entirety of their funds, as the insurance scheme is designed to safeguard small depositors in case of such financial irregularities.
The government’s consideration of increasing the deposit insurance limit reflects its awareness of growing concerns over the stability of financial institutions, particularly cooperative banks. As investigations into the New India Co-operative Bank scam continue, the move to boost deposit insurance coverage is likely to reassure depositors and enhance the public’s confidence in the banking sector.
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