‘Depositors First: Guaranteed Time-bound Deposit Insurance Payment up to ₹5 Lakh.’- PM Modi
After the Punjab and Maharashtra Bank fiasco, the depositors’ issues in cooperative banks have come to light. Previously, several urban cooperative banks have escaped scrutiny due to dual supervision from the RBI and State Registrar of Societies.
Shaktikanta Das, The Governor, Reserve Bank of India, hinted at the possible regulatory changes to reform the banking scenario in urban India.
These possible reforms are for urban cooperative banks that have been failing. Das warned the general public against investing in banks that offer high returns.
The Governor hailed the government’s decision to raise the insured limit for bank deposits to ₹5 lakh from ₹1 lakh with a 90-day time limit to pay out such deposits. Mr Das warned the depositors that higher returns are usually associated with higher risks.
In chasing such high returns, the depositors should be very careful in putting their money. Mr Das was seen as quoting: “I would like to mention in all this is that the depositors themselves must also be very discerning.”
Mr Das also advised that payment of deposit insurance should be seen as a “measure of last resort”. PM Modi, along with Das, paid over ₹1,300 crores to people who deposited their years of savings in distressed banks.
Modi announced a similar waiver for additional three lakh depositors whose money is stuck in other banks soon.
In the same event, Das noted- “I am not generalising. There are institutions that are offering higher interest rates which are viable, but depositors should always be very careful”.
Mr Modi noted that such issues afflict cooperative banks more. Mr Modi’s idea was to empower the cooperative banking system. This system will raise depositors’ confidence as the RBI would overview the work of the Cooperation Ministry.
Mr Das, giving the example of new governance rules for commercial banks and reforms in the cooperative sector, pointed out how the government is concerned with the people and their problems.
Union Finance Minister Nirmala Sitharaman, too, said that this decision is taken keeping in mind the plight of the middle class.
Mr Modi recalled an incident as the Chief Minister of Gujarat. He talked of incidents where banks got into trouble, leaving depositors stranded. Then, he had requested the higher authorities to increase the deposit insurance from Rs 1 Lakh to Rs 5 Lakh; but his request went unheeded.
Unique Application Process:
While laws are applied from the date they’re passed from the Parliament, these “Deposit Insurance” Laws are applied retrospectively. It means that people who have tolerated this for the past 5-6 years will also get relief, and their hard-earned money will return to them.