Chief Minister N. Chandrababu Naidu wrote a letter to Union Finance Minister Arun Jaitley requesting his intervention in increasing the deposit insurance in commercial banks to ₹15 lakh from the existing ₹1 lakh.
Mr. Naidu, in his letter on Monday, said that the Deposit Insurance and Credit Guarantee Corporation established in 1978 insures all bank deposits such as savings, fixed, current and recurring deposits up to a limit of ₹1 lakh for each depositor. The limit for providing deposit insurance was set to ₹1 lakh as 90% of the accounts had that much or less amounts in 1993. But, that share has shrunk to 67% (the percentage of deposits covered by the insurance) by March 2016. If 90% of the deposits were to be still covered, then the threshold should have to go up to at least ₹15 lakh, he felt.
The Chief Minister said that the number could be further revised upwards by taking inflation and cost of living into consideration. “Doing so, shall even mitigate the mass hysteria and fears that the people had on the security of their deposits after the time of passing FRDI Bill,” he said.
Mr. Naidu said increasing the deposit insurance comes at a cost. Currently, banks have to pay a premium of about 10 paise per ₹100 insured. Any hike in the threshold would raise the amount of premium. It was therefore recommended to ensure that the premium amount was borne by the banks and the charges were not passed on to the customers, he added.
