Deposit Insurance Explained: Things You Should Know If Your Bank Fails

To deal with the crisis after the recent incident of PMC Bank Finance minister Nirmala Sitharaman on Monday stated that she is closely monitoring the developments at the bank and that the administration could consider raising deposit guarantee limit from existing Rs 1 lakh.

The minister also disclosed that she had a discussion with RBI Governor Shaktikanta Das about the deposit guarantee of Rs 1 lakh being instantaneously released but was informed that the deposit guarantee could only be released after the bank is closed and not when the bank is a going concern. 

Sitharaman also said if the deposit guarantee limit from existing Rs 1 lakh is raised, it will be through Parliament. She said that the RBI Governor has assured that customers’ interests will be protected. A report from SBI also additionally featured the need to return to the present maximum farthest point of store protection.

Customers of the crisis-ridden bank can now withdraw up to Rs 40,000 as per the most recent upgraded limit by RBI. It is to be noticed that under the present bank store protection plot in the event of impossible bank disappointment stores up to ₹1 lakh is guaranteed and paid back to the contributor.

This plan guarantees a wide range of bank stores including reserve funds, fixed and repeating with a protected bank. The bank stores are protected by Deposit Insurance and Credit Guarantee Corporation (DICGC), a backup of the Reserve Bank of India. The organization doesn’t straightforwardly fee on any premium from bank contributors however banks pay an ostensible premium for the spread.

Here are a few features of the present store protection plot on bank stores:

1. The ₹1 lakh point of confinement covers both head and intrigue sum.

2. All stores kept up by the contributor over all parts of the bank are clubbed. Or on the other hand, as it were, if an individual keeps stores in various parts of a bank, they are paid a limit of up to Rs. 1 lakh just on the total sum. In any situation, deposit kept up with various banks are not clubbed.

3. The deposit protection plan covers all banks working in India including private division, co-employable and even parts of remote banks in India. There are a few exceptions like stores of remote governments, stores of focal/state governments and between bank stores.