NEW DELHI/MUMBAI (Reuters) – A senior official announced on Monday that India is considering an increase in bank deposit insurance coverage, shortly after the central bank imposed withdrawal restrictions on New India Co-operative Bank due to oversight issues.
Currently, deposits of every bank account holder in India are insured up to 500,000 rupees ($5,758) in the event that a bank fails. This limit was raised from 100,000 rupees in 2020 after restrictions were imposed on Punjab and Maharashtra Cooperative Bank due to financial misconduct.
Financial Services Secretary M. Nagaraju stated that “this is actively being considered by the government” regarding a potential increase in the coverage limit.
He added that “we will notify as soon as the government approves,” but he did not disclose any details about the possible new limit.
When asked about the declining sentiment among depositors following the restrictions on New India Co-operative Bank, Nagaraju mentioned that the Reserve Bank of India (RBI) is aware of the situation but refrained from making further comments.
On February 13, the RBI dissolved the board of the Mumbai-based bank and prohibited it from issuing new loans, while also suspending withdrawals for a period of six months. ($1 = 86.8410 Indian rupees)
(Reporting by Sai Ishwarbharath B, writing by Nikunj Ohri; Editing by Savio D’Souza)
