Banking Sector Reforms

Bank Deposit Insurance Programme


From UPSC perspective, the following things are important :

Prelims level: Bank Deposit Insurance Programme

Mains level: Bank distress and failure

The PM has addressed depositors during a programme titled ‘Depositors First: Guaranteed Time-bound Deposit Insurance Payment up to ₹5 Lakh’.

Deposit Insurance Programme

  • The bank savings are insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act providing full coverage to around 98 per cent of bank accounts.
  • Earlier, account holders had to wait for years till the liquidation or restructuring of a distressed lender to get their deposits that are insured against default.
  • Last year, the government raised the insurance amount to Rs 5 lakh from Rs 1 lakh.
  • Prior to that, the DICGC had revised the deposit insurance cover to Rs 1 lakh on May 1, 1993 — raising it from Rs 30,000, which had been the cover from 1980 onward.

What are new changes?

  • Earlier, out of the amount deposited in the bank, only Rs 50,000 was guaranteed, which was then raised to Rs 1 lakh.
  • Understanding the concern of the poor, understanding the concern of the middle class, we increased this amount to Rs 5 lakh.
  • If a bank is weak or is even about to go bankrupt, depositors will get their money of up to Rs five lakhs within 90 days.

Significance of the scheme

  • Earlier account holders could not access their own money for up to 8-10 years after financial stress at banks.
  • The new changes would give confidence to depositors and strengthen the banking and financial system.
  • Now, depositors can get insurance money within 90 days, without waiting for the eventual liquidation of the distressed banks.


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