RBI Deputy Governor moots full cover for small depositors

A periodic upward revision in the uniform deposit insurance coverage of Rs 5 lakh is necessary as India’s growth and formalisation are likely to lead to a significant rise in primary and secondary deposits, which might create a gap between the ideal insurance reserve requirement and the available reserves, Deputy Governor, Reserve Bank of India, M Rajeshwar Rao said.

Currently, there is a uniform deposit insurance coverage of Rs 5 lakh per depositor of each insured bank in India.

“Considering multiple factors like growth in the value of bank deposits, economic growth rate, inflation, and increase in income levels, a periodical upward revision of this limit may be warranted. This means that the deposit insurer has to be mindful of the additional funding and needs to work out suitable options to meet the same,” said Rao while speaking at the International Association of Deposit Insurers (IADI) Asia-Pacific Regional Committee International Conference.