India Considers Raising Deposit Insurance Amid Co-operative Bank Crisis

The Indian government is considering increasing the deposit insurance limit beyond the current Rs 5 lakh, following a recent bank scam. This proposal aims to strengthen depositor protection in the wake of the New India Co-operative Bank crisis. Over 90% of the bank's depositors will be covered under existing insurance.

The Indian government is contemplating a move to raise the deposit insurance limit beyond Rs 5 lakh, according to a senior finance ministry official. The proposal comes in the wake of the New India Co-operative Bank scam, amid efforts to bolster depositor confidence.

On Monday, Financial Services Secretary M Nagaraju confirmed that such a measure is under active consideration. "As and when the government approves, we will notify it," he stated during a press conference attended by Finance Minister Nirmala Sitharaman. Despite the ongoing crisis, officials maintain confidence in the cooperative banking sector's robustness.

The New India Co-operative Bank scam revealed irregularities including missing funds of Rs 122 crore. The DICGC currently covers over 90% of the bank's depositors. Secretary Ajay Seth emphasized that the RBI closely regulates the cooperative banks, ensuring the sector's stability despite isolated incidents.