Will India Increase Bank Deposit Insurance to Restore Public Trust?

Delhi - In the wake of a staggering ₹122 crore fraud at New India Co-operative Bank, the Indian government is considering raising the bank deposit insurance limit beyond the current ₹5 lakh. This move aims to strengthen depositor confidence, which has been shaken by recent banking scandals.  

The New India Co-operative Bank scandal led the Reserve Bank of India (RBI) to impose a six-month moratorium, suspending withdrawals and superseding its board due to "material supervisory concerns." Depositors, especially those with funds exceeding the insured ₹5 lakh, are now facing financial uncertainty, highlighting the need for stronger protective measures.  

Financial Services Secretary M. Nagaraju confirmed that the government is actively reviewing an increase in deposit insurance. The last revision took place in 2020 when the limit was raised from ₹1 lakh to ₹5 lakh following the Punjab and Maharashtra Co-operative Bank crisis.  

The Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI, currently insures deposits up to ₹5 lakh per depositor per bank. While this covers nearly 98% of deposit accounts, it protects only about 50% of the total deposit value, leaving a significant portion unprotected.