Increase in deposit insurance widens to 50.9% of total deposits
Bombay : The increase in deposit insurance to ₹5 lakh led to an increase in insured deposits to 50.9% of total deposits at the end of March 2021, allowing for broader coverage, the 2021-22 Economic Survey said on Monday.
Following the announcement in the Union Budget 2020-21, deposit insurance coverage was increased from ₹1,000,000 ₹5 lakh per depositor, per bank. “In terms of amount, the total insured deposits ( ₹76.2 trillion) at the end of March 2021 constituted 50.9% (compared to around 30% under ₹1 lakh of cover) of total taxable deposits ( ₹149.7 trillion) compared to the international benchmark of 20-30%,” he said.
Looking at it in terms of the number of insured deposit accounts, the number of accounts fully protected at 247.8 crore in FY21 constituted 98.1% of the total number of accounts of 252.6 crore, compared to the 80% international benchmark.
Deposit insurance coverage began with ₹1,500 in 1961 and was gradually increased to ₹1,000,000 in 1993.
According to the survey, the percentage of insured deposits out of total deposits is 84% for Regional Rural Banks (RRBs), 70% for Co-operative Banks, 59% for State Bank of India (SBI), 55% for other public sector banks, 40% for private sector banks and 9% for foreign banks.
Until March 31, 2021, a cumulative amount of ₹5,763 crores have been paid for claims since the inception of deposit insurance: ₹296 crore relating to 27 commercial banks and ₹5,467 crores for 365 cooperative banks.
“The functions of the Deposit Insurance and Credit Guarantee Company (DIGCC) are governed by the provisions of the DICGC Act 1961 and the DICGC General Regulations 1961. Under the Act, the company is required to pay the insured deposit amount to depositors of an insured bank,” the survey states.
These liabilities arise when an insured bank undergoes liquidation, reconstruction and merger or acquisition by another bank.
“The deposit insurance provided by DICGC covers all commercial banks including payment banks, small financial banks, regional rural banks, branches of foreign banks in India, local banks and cooperative banks in all states and union territories,” he said.
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