India’s deposit insurance fund, close to Rs 2 lakh crore, is the third-largest globally. However, it covers only 46.3% of bank deposits due to the Rs 5 lakh cap on insurance coverage. Most deposits are with public sector banks or systemically-important banks that are unlikely to fail. Senior citizens are demanding a hike in the coverage reasoning that a chunk of their life savings are at stake. The deposit insurance ceiling started at Rs 1,500 in 1962 and was gradually. increased to Rs 30,000 in 1980. It remained at that level until 1993, when it was. raised to Rs 1 lakh. For 27 years, it was not revised until 2020, when. it was hiked five times to Rs5 lakh after issues at several private banks, including Yes Bank, triggered. deposit withdrawals. In Aug 2024, RBI deputy governor M Rajeshwar Rao had called for periodic revision of premia of deposit-taking institutions with full coverage for certain segments like small deposits and senior citizens.
