Govt Planning To Raise Insurance Cover On Bank Deposits To Above Rs 1 Lakh: FM Sitharaman

Finance Minister Nirmala Sitharaman on Friday said the government will bring legislations on raising insurance cover on bank deposits from the current Rs 1 lakh and regulating multi-state cooperative banks amidst a crisis in PMC Bank.

At present, bank depositors get an insurance cover of Rs 1 lakh on their amount. (File Photo/ Getty)

New Delhi: Finance Minister Nirmala Sitharaman on Friday said the government will bring legislations on raising insurance cover on bank deposits from the current Rs 1 lakh and regulating multi-state cooperative banks amidst a crisis in PMC Bank affecting lakhs of depositors. These legislations will be brought during the Winter Session of Parliament starting Monday, the minister told reporters here. "Work is on and we shall go to the Cabinet for approval to introduce a legislation in winter session. The legislation will amend the necessary Acts and the laws to make sure that banking functions undertaken by cooperatives sector will be brought under the Banking Regulation Act for complying with prudential norms," she said. Unless the prudential norms are applied, many of the things that are emerging in the light of the Punjab and Maharashtra Cooperative (PMC) Bank crisis will never be addressed and this legislation will ensure that no PMC like case happens in the future, she added. With regard to deposit guarantee insurance limit hike, Sitharaman said it may not be part of cooperative bank legislation but part of some other laws. "We might want to increase the minimum amount of Rs 1 lakh (deposit cover). The government plans to bring this (legislation) during the winter session," she said. These legislations assume significance in the wake of scam in the PMC Bank affecting lakhs of customers who are facing difficulties in withdrawing their entire money due to restrictions imposed by the Reserve Bank of India. At present, bank depositors get an insurance cover of Rs 1 lakh on their amount by the Deposit Insurance and credit Guarantee Corporation. Deposit insurance is static at Rs 1 lakh since 1993. As much as 90 per cent of the accounts had that much or less amount when this limit was raised to Rs 1 lakh. The Raghuram Rajan Committee on Financial Sector Reforms 2009 had recommended strengthening the capacity of the Deposit Insurance and Credit Guarantee Corporation, a more explicit system of prompt, corrective action, and making deposit insurance premia more risk-based. With regard to GST revenue, the finance minister said that the collection in November will improve and will definitely be good. She expressed hope that the country will achieve USD 5 trillion economy goal by 2024-25 and the government is taking steps to achieve that target. On disinvestment, the finance minister said the process is moving very well. "Strategic divestment, residual divestment is moving forward comfortably and I am very confident that at least some of them will be done during the year," she said. "Things are also moving on Air India and road shows are happening at various places," she added. Sitharaman said the revised estimate meetings have started and a clear picture on government finances would be known in the next few weeks. Amidst pressure on the revenue collection, she said the government has no plans to cut spending on welfare schemes. The government is encouraging all the departments of the Union government to spend entire funds provided in the Budget, she added.