Sahakar Bharati Recommends Risk-Based Premium for Banks

An NGO in the cooperative sector, having a presence in over 400 districts across India, has proposed a higher insurance cover for bank deposits and a migration to a risk-based premium model. 

In a letter to the Finance Minister Nirmala Sitharaman, the representatives of Sahakar Bharati have suggested raising the deposit insurance limit from Rs.1 lakh to Rs.5 lakh for individual account holders and Rs.25 lakh for institutional customers. Sahakar Bharati is associated with more than 20,000 co-operatives across India.

In 1993, the cover was increased from Rs.30,000 to Rs.1 lakh. Due to the collapse of Punjab and Maharastra Co-operative Bank, everyone demanded a rise in the cover. Sahakar Bharati recommends that the risk-based premium should be introduced irrespective of the nature of ownership of the bank. This will enable depositors to make a seamless choice of banks to place deposits.

Sahakar Bharati has interacted with its stakeholders to come up with a special provision in the Deposit Insurance & Credit Guarantee Corporation (DICGC) Act, 1961. The act protects the interests of depositors of fraud affected banks such as PMC Bank and Pen Urban Co-operative Bank. The organisation recommends that DICGC should create a separate reserve considering the depositors of banks, which fail on account of frauds.

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The representatives of Sahakar Bharati have had discussions with bankers, individuals, and institutional depositors such as educational institutions, hospitals, temples, charitable and social institutions, chartered accountants, co-operative housing societies, lawmakers, accountants, and social activists.

The NGO has stated that banks should be permitted to get additional insurance cover over and above the limit against payment of extra premium. It is estimated that 75% of the banks are unlikely to fail. However, the NGO feels that there is no immediate need to revise the premium on deposit.

The letter from Sahakar Bharati was signed by Dr Uday Joshi, National General Secretary; Ramesh Vaidya, President; and Satish Marathe, Founder Member of the NGO and Director of the Reserve Bank of India.

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