Patchwork progress  

Source: The Hindu

Synopsis: The Government has recently introduced changes to 1961 Deposit Insurance and Credit Guarantee Corporation law.


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Benefits for depositors: Added Points
  • As per RBI data, ₹76.21 lakh crore or almost 51% of deposits are now insured, but 98.3% of all accounts have balances of ₹5 lakh or less, so they are fully insured.
    • This can be a source of renewed comfort for people in the banking system which is important for financial stability
Issues existing:
  1. First, making incremental changes in quick succession suggests a piecemeal approach to governance rather than a system-wide view.
  2. Second, given the rising distress in households and the downward momentum in savings levels due to the pandemic, this change must be allowed to make it through the din in Parliament.
  3. Third, the outcome is not satisfactory for several people with limited financial literacy and access to retirement savings instruments, with lifetime earnings (possibly over ₹5 lakh) parked in a neighborhood co-operative bank.

Hence, just as the latest amendments have an enabling provision, there should have been one modification to raise the insured deposit limit in line with inflation and per capita income trends.

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