A good percentage of the depositors in India have deposits in bank over Rs. 1 lakh. In the condition of the bank declaring bankruptcy, depositors will be eligible for the return of Rs. 1 lakh only. It is the lowest amount guaranteed by banks in comparison to the other similar sized nations in the world. It is a matter of great worry. The Reserve Bank of India and the Indian government need to take required initiatives to provide the depositors of the country the required peace of mind for their savings.
The minimum insurance guarantee of Rs. 1 lakh is too low and it certainly needs to be increased. It is mere $1500 insurance cover per account in a bank. †Let us understand it in a better way with an instance. A customer with the bank deposits of Rs. 100000 has his/ her cover in full amount while a customer with the bank deposit of Rs. 1000000 will be eligible to get Rs. 1 lakh only in case of the bank declaring failure. As per the sources, only 7.8% of the depositors have deposits below Rs. 1 lakh. The insurance covers of Rs. 1 lakh do not provide the required financial security to the depositors with above Rs. 1 lakh deposits.
According to a SBI report, the Rs. 1 lakh cover shield which covered 75% bank deposits in 1982 decreased to 28% by 2018. It is again a matter of big concern. If we talk about the BRIC countries, Russia provides Rs. 12 lakh cover and Brazil covers Rs. 42 lakh. Depositors run a big risk in countries like India.
The ongoing Punjab and Maharashtra Cooperative (PMC) Bank crisis has brought the problem of Rs. 1 lakh insurance cover in picture. A serious discussion and solution will be able to provide peace of mind to the customers in the country. The Financial Resolution and Deposit Insurance (FRDI) Bill introduced by late Finance Minister Arun Jaitley in 2017 was later withdrawn in 2018 giving certain reasons.
The important point to note is that after liberalization none of the commercial bank has ‘failed’ because the Reserve Bank of India (RBI) have made sure that such weak banking institutions are acquired by some other stronger Bank.
The time has turned up and depositors need to think on their decisions of bank deposits and investments in other banking products. At many times, customers are lured by the higher rate of interest on deposits or returns resulting in the disappointment at the end. It is better to prefer lower returns if banks provide certainty on return on invested capital.
Opting to get less return with certainty on capital return is a sensible decision. If you wish to stay secure and save youíre hard earned money better consult dependable financial consultants at companies like Artworks Money in the market. Stay alert, act smartly and plan your savings with the help of expert financial consultants near you and park bank deposits in a more secure way by spreading the deposits across several banks.
Recheck the source. The figure of 7.8% does not look convincing.