Bank Deposit Insurance Cover Increased to Rs 5 Lakh, Refund in 3 Months

More than one lakh depositors have received their refund in the last few days that the banks held for years. Prime Minister Narendra Modi mentioned that this amount equals more than Rs 1,300 crore in an event held in New Delhi.

In India, insurance concerning bank depositors came into the picture in the 60s. Previously, out of the deposited amount in a bank, there was a guarantee of only Rs 50,000. Later, this was increased to Rs 1 lakh. Thus, if a bank sank, a depositor would get only up to Rs 1 lakh. A time limit as to when exactly this money will be paid was not determined. The government has increased this amount to 5 lakh after understanding the concern of the poor and the middle class.

The government has presently made it compulsory to return the money to depositors within 90 days in the event of a bank sinking. The deposit insurance comprises fixed, savings, recurring, current deposits, etc., in all commercial banks operating in India. Deposits in Central, State, and Primary cooperative banks, operating in States/Union Territories are also covered.

As per the PMO statement, with Rs. 5 lakh as the deposit insurance coverage per depositor per bank, the number of protected accounts at the end of the earlier financial year comprised 98.1% of the total number of accounts versus the international benchmark of 80%.

For any clarifications/feedback on the topic, please contact the writer at bhavana.pn@cleartax.in

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