New Delhi, October 15: The Punjab and Maharashtra Cooperative Bank crisis that unfolded a few weeks ago has stirred up discussion about deposit insurance in India. But it also brought back focus on meagre deposit insurance cover, big and emerging economy like India provides to its citizens in comparison to its counterparts all across the world.
Deposit insurance in India is just like any other insurance policy. Currently, the limit is capped at Rs 1 lakh for both principal and interest held in a bank even if it has several deposits in different branches.
A recent report by India’s largest lender State Bank of India (SBI) said that the deposit insurance coverage in India is one of the lowest in the world. In India, deposits are insured up to Rs 1 lakh, while the comparable number for BRICS countries like Brazil and Russia stand at Rs 42 lakh and Rs 12 lakh, respectively.
"Data on Cross Country Deposit insurance Coverage limit shows that deposit insurance coverage in India is one of the lowest at Rs 1 lakh / $1508 / 0.9 times India's per capital income, " an SBI Ecowrap report said.
However, International Association of Deposit Insurers (IADI), annual survey 2018, highlights the issue of low deposit cover in India in comparison to other countries.
In developed countries such as Canada, Switzerland, and France the insurance cover is about $75,000 to $1,11,000 per depositor. In the US, the Federal Deposit Insurance Corporation offers insurance coverage of $250,000. Most of these countries cover 60-70 per cent of total deposits but in India, only about 30 per cent of deposits in value terms are covered.
Why Deposit Insurance Cover Is Not Increased?