At 1L, India’s bank deposit insurance lowest in world
Mumbai: Protection of deposits in Indian banks through insurance is among the lowest in the world in India, at Rs 1 lakh per bank account (about $1,508), well below the level in developed economies and even other BRICS nations.
While the deposit insurance extended in India covers 70% of depositors in terms of number, only 7.8% of the deposit base comprises deposits below Rs 1lakh. What this means is that risk-averse people who choose bank deposits to park their life savings could lose a large chunk of their funds if there is a bank failure.
The issue of depositor protection, which last came to the fore when late finance minister Arun Jaitley introduced the Financial Resolution and Deposit Insurance Bill in 2017, has again gained importance in the wake of the PMC Bank failure and reports of other private banks coming under RBI’s scanner.