The finance ministry may raise the bank deposit insurance to Rs 5 lakh from Rs 1 lakh, which will be the first upward revision since 1993. A separate scheme could be chalked out for wholesale depositors at Rs 25 lakh, the report said.

The last revision on the deposit insurance was done on May 1, 1993, when the retail cover was raised to Rs 1 lakh from Rs 30,000.

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The central board of the Reserve Bank of India (RBI) might discuss the subject at a meeting on December 13, the report said.

Deposit Insurance may be hiked to 5 lakh
Deposit Insurance may be hiked to 5 lakh

It was not immediately clear if the premium paid by banks to the Deposit Insurance and Credit Guarantee Corporation (DICGC) would also be raised, an official told Business Standard.  This premium is currently at 10 paise per Rs 100.

There are two more proposals that the Finance Ministry is considering. The first is that banks be permitted to obtain additional deposit insurance by paying an additional premium.

The second is that the DICGC, a subsidiary of the central bank, create a reserve to protect depositors’ interests when banks fail due to fraud.

The report did not clarify whether the Cabinet and RBI will evaluate the concept of risk-based premium.

The recent Punjab and Maharashtra Co-operative Bank crisis that has left lakhs of depositors unable to access their savings, has alarmed bank customers. The move to enhance deposit insurance cover is being seen as a confidence-building measure.

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