Government to provide higher deposit cover: Nirmala Sitharaman

NEW DELHI: Finance minister Nirmala Sitharaman on Friday said the Centre is set to raise the insurance cover for bank deposits beyond the current level of Rs 1 lakh, while amending the law to improve RBI’s oversight on multi-state co-operative banks.
The twin moves follow the recent collapse of PMC Bank, with Sitharaman saying the idea is to ensure that the banking function of cooperatives is brought under the Banking Regulation Act so that there is compliance with prescribed prudential norms.
Currently, multi-state cooperatives are under the regulatory purview of RBI as well as state cooperative societies, leaving scope for misuse.
Although the minister did not specify the proposed amount, she said the government would amend the law to provide a higher limit as the current cover was decided several years ago.
While the deposit insurance extended in India covers 70% of depositors in terms of number, only 7.8% of the base comprises deposits below Rs 1 lakh.
‘RBI evaluating if PMC assets can be sold to recover money’
The issue of deposit insurance has come to haunt several depositors of PMC Bank, who had parked their entire savings in the scam-hit entity, and are now facing curbs on withdrawal with no certainty of recovering their hard-earned money. The finance minister said that RBI was evaluating if the assets of PMC Bank could be sold to recover money, which could be disbursed to the depositors.
The minister also said that the government was reviewing if the assistance extended by banks to non-bank finance companies was limited to only a handful of top-rated entities. While pointing out that the Indian Banks’ Association had indicated that the special funding facility could be extended to investment-grade NBFCs as well, the government has asked for data on the assistance made to AAA-rated companies and a decision will be taken soon.
NBFCs have been reeling under distress due to liquidity squeeze as banks became reluctant to provide funds and there was risk aversion in the financial sector after the collapse of IL&FS and problems at DHFL.
Meanwhile, four housing projects have made a preliminary pitch from the Rs 25,000 crore real estate fund announced by the government less than 10 days ago to enable completion of delayed flats.
The initial interest has come from projects in Mumbai, Hyderabad and Bangalore, which is being looked into by the government.