Centre To Increase Deposit Insurance To Rs. 5 Lakh, Pay More On Bank Failure

As per an Indian Express report, in case of bank failure, their liability will increase to Rs. 5 lakh as deposit insurance is proposed to be increased from the current Rs. 1 lakh to Rs. 5 lakh. This obligation for banks will arise in a case when they fail to meet deposit pay out obligation.

Further as per the leading English daily, the finance ministry has unveiled a comprehensive resolution framework for assisting the financial industry in doing away with any kind of failures or in case of a failure limit their far-reaching effect. At the same time, the government is expected to come out with a framework as part of a new ruling and has plans to establish a Resolution Authority with officials from the financial services industry and senior government officials.

The resolution authority will bring in financial institutions of all kinds that have been lately in news for all the trouble. The government after continuing discussion that include those during FSDC meet has reached to this conclusion. Back in 2018, due to the bail in clause, the government had done away with its proposal of FRDI or Financial Resolution and Deposit Insurance Bill.

"The Bill is expected to come in the Parliament after it is cleared by the Union Cabinet. Department of Economic Affairs has been piloting it and is expected to be ready with it. The bail-in provision was controversial and the government would truncate the issue and bring it. So, the government would be coming up with the revised version of the bill," a senior government official said in the report.

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