Report: Impact of insurance guarantee of more than Rs 5 lakh on deposits on banks’ profits
New Delhi| Increasing the insurance guarantee limit on bank deposits above Rs 5 lakh may affect the profits of banks. Rating agency ICRA said, currently in case of bank collapse, deposits up to Rs 5 lakh are covered through Deposit Insurance and Credit Guarantee Corporation (DICGC). The government is considering increasing this limit.
ICRA said, due to the recent failure of New India Cooperative Bank, the idea of increasing the insurance limit might have come up. But, such a move could reduce the profits of banks by Rs 12,000 crore. Earlier this limit was increased from one lakh to Rs 5 lakh in February, 2020 after the Punjab and Maharashtra bank crisis. By March, 2024, 97.8 percent of bank accounts were fully covered. By deposit value, the Insured Deposit Ratio (IDR) had stood at 43.1 per cent as of 31 March 2024.
All sums in Indian banks have a deposit insurance cover of up to Rs 5 lakh per customer under the Deposit Insurance and Credit Guarantee Corporation (DICGC) and you get the same amount. Irrespective of whether the deposit is 1 million, or 20 million or one million. If someone’s deposit is Rs 1 lakh then he will get Rs 1 lakh in full. If 5 lakhs is deposited then five lakhs will be given. Even if you have deposited more than that, you will get only Rs 5 lakh. However, if your deposits are in multiple banks and all the banks are liquidated then each bank will give Rs 5 lakh. But if there are multiple accounts in the same bank, the total amount will be only Rs 5 lakh. As per the existing instructions issued, depositors will have to wait for six months to receive the amount.
Complete details can be seen on DICGC website
Depositors can contact bank officials for more information. Details can also be viewed on DICGC’s website: www.dicgc.org.in. If you want to withdraw money then the bank verifies it. If everything is found correct then the amount is returned. RBI imposes restrictions on any bank when the financial condition of the bank is not good, or the bank management is doing some scam. There was a scam in New India Cooperative Bank. Upon learning of this, the central bank immediately took over the administrative powers of the entire bank and handed over the charge to a former SBI official.
Open account in big and reputed banks
In our country, governance is rarely followed in small credit societies and cooperative banks. Taking advantage of this, such institutions give more loans to their people or those companies which are not able to return this amount. Later this amount becomes NPA and the financial condition of the bank becomes disturbed. In such a situation, accounts should be opened at any time only in big banks of government or private sector. The governance and rules and regulations of these banks are very strong. Due to good board and management, the possibility of irregularities in these banks is very less. This keeps your entire money safe.
Such financial institutions do not cancel or close licenses
The instructions issued by RBI should not be construed as cancellation or discontinuance of banking license. The Bank will continue banking operations with restrictions until its financial position improves. RBI may modify these instructions depending on the changing circumstances. RBI may approve imposition of certain withdrawal limits before complete resolution of problems. This may provide some relief to the depositors.
