Mumbai: The Reserve Bank employees unions on Tuesday urged the government to hike the insurance cover on bank deposits from the present ₹ 1 lakh to ₹ 10 lakh.
The demand for expanding bank deposit insurance cover, which was last revised in May 1993, has come to the fore after the ongoing crisis at Punjab & Maharashtra Cooperative Bank.
Over the weekend, finance minister Nirmala Sitharaman had said government would bring in a legislation during the ongoing Winter session to increase the deposit insurance cover from ₹ 1, yetdid not specify a number.
"We had earlier suggested hiking the insured deposit cover to at least ₹ 10 lakh, covering all types of deposits of an individual, which we reiterate and urge the government to consider," the All-India Reserve Bank Employees Association stated in a statement.
In dollar terms, the proposed cover at around USD 14,000 is much lower than in many other countries, it included.
At present, the Deposit Insurance and Credit Guarantee Corporation insures each bank depositor up to a maximum of ₹ 1 lakh for both principal and interest as on the date of liquidation or cancellation of a bank's licence.
As per an ongoing report by SBI Research, at ₹ 1 lakh, the cover is one of the lowest and is at only 0.9 times per capita income. As against this, in Brazil and Russia, the same stands at ₹ 42 lakh and ₹12 lakh respectively.
Noting that raising the coverage has been long overdue, the Reserve Bank union noted that the ₹ 1 lakh cover was set in May 1993, during the time the value of rupee has eroded sharply, necessitating an immediate hike.
Last week, Nirmala Sitharman had also said the government would bring legislation to better regulate multi-state cooperative banks.
The Reserve Bank union also demanded bringing urban co-operative banks, which have dual regulation now by the states and RBI, exclusively under the jurisdiction of the RBI.