- Govt is considering to raise the protection on bank deposits from the current Rs 1 lakh when the FRDI Bill is taken up for final drafting
- Currently deposits beyond Rs 1 lakh treated at par with claim of unsecured creditor as of now
- The move to raise security cover for bank deposits comes amid fears over deposits being used to ‘bail in’ ailing bank
NEW DELHI: The government is considering to raise the protection on bank deposits from the current Rs 1 lakh when the Financial Resolution and Deposit Insurance(FRDI) Bill is taken up for final drafting, highly-placed sources said.
At present, each depositor is protected only up to a limit of Rs 1 lakh by the guarantee of the Deposit Insurance and Credit Guarantee Corporation (DICGC). Deposit beyond Rs 1 lakh does not have any protection guarantee and is treated at par with claim of unsecured creditor as of now. There have been no instances of banks failing in recent years as RBI has stepped in to work out a resolution plan, without creating any risk for depositors.
However, sources said the government recognises that there is a need to assure those who put in their life savings in banks and to make a provision to that effect in the bill, which is being examined by a Parliamentary panel led by BJP’s Bhupendra Yadav. “During the informal consultations we have had so far, members of the committee are also supportive of the idea and so the likelihood of the protection being raised substantially, is very high”, said a government source.
FM Arun Jaitley on Thursday said the government was committed to protecting interest of depositors and financial institutions, as authorities allayed apprehensions over provisions of the FRDI Bill.
Once a financial services company, including a bank, slips into critical category, the Resolution Corporation will take over the firm and prepare a resolution plan during a year, which can be extended by another 12 months.