New Delhi: The Narendra Modi government will amend the relevant law to ensure the insurance cover for bank deposits is raised from the existing Rs 1 lakh, Finance Minister Nirmala Sitharaman said Friday.
The government will table these amendments in the upcoming winter session of Parliament beginning 18 November.
Speaking at a press interaction, Sitharaman, however, did not specify the extent to which the cover will be increased. She said the government was yet to finalise the quantum of the increase.
When asked if the government is looking at a revised version of the Financial Resolution and Deposit Insurance Bill to introduce the higher insurance cover, Sitharaman said the government was “weighing its options” about how to bring in the amendments.
The government had introduced the FRDI Bill last year but withdrew it later after receiving a lot of backlash over some of its provisions.
The bill had proposed a “bail-in” clause that suggested depositor money could be used by failing financial institutions to remain solvent. A lack of clarity about the deposit insurance levels for small depositors had also caused concerns among the public, prompting the government to withdraw the bill.
Coop banks to be brought under banking regulation act
The finance ministry will also approach the cabinet to approve amendments to ensure that cooperative banks are brought under the banking regulation act so that prudential norms are applicable to these banks too, Sitharaman said.
The government is also in talks with the Reserve Bank of India to see if the confiscated properties of the promoters of Housing Development and Infrastructure Limited can be used to pay off the depositors of Punjab and Maharashtra Cooperative Bank, said the minister.
The massive scam unearthed at the Punjab and Maharashtra Cooperative Bank had raised questions about the lack of regulatory supervision over such banks. Many depositors were left in a lurch after the RBI capped deposit withdrawal from the bank after it emerged that the bank management had violated lending norms to loan Rs 6,500 crore to HDIL. It was also found that the bank management had created many dummy accounts to facilitate this.
The Enforcement Directorate had confiscated assets amounting to nearly Rs 3,800 crore.
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aha 1 lakh is small and will make it 2 lakh!!!