New Delhi: The Reserve Bank of India has increased the insurance cover on bank deposits from Rs 1 lakh to Rs 5 lakh. The move comes immediately after the announcement of Budget 2020 was made recently.
Since 1993, deposit insurance cover provided by RBI’s subsidiary Deposit Insurance and Credit Guarantee Corporation (DICGC) was fixed at Rs 1 lakh.
The hike in insurance cover on bank deposits has been introduced to improve the trust of people in the banking system after the infamous scam of PMC bank last year and the rising number of co-operative banks’ failure.
With the increase in the insurance cover, the banks will now be providing a premium of 12 paise against 10 paise per Rs 100 deposit.
In a recent development, the Reserve Bank also announced that it does not see any major effect on the balance-sheets of banks due to the five-fold increase in deposit insurance to Rs 5 lakh.