RBI Deputy Governor Suggests Full Insurance Cover for Senior Citizens’ Deposits
(Patiala 7th March – Special report by Navneet Bansal / Jaswinder Jhulka for News Room 7) Reserve Bank of India Deputy Governor M. Rajeshwar Rao has suggested considering full insurance coverage for bank deposits of senior citizens and small depositors, following concerns arising from the failure of some cooperative banks.
Speaking at a conference organised by the Deposit Insurance and Credit Guarantee Corporation (DICGC) in Jaipur, Rao said senior citizens were among the worst affected when cooperative banks collapsed. Many of them had placed their retirement savings in such banks to earn higher returns.
Referring to the crisis at Punjab and Maharashtra Cooperative Bank, he noted that several depositors had funds exceeding the ₹5 lakh deposit insurance limit, leaving them exposed to losses.
Currently, bank deposits in India are insured up to ₹5 lakh per depositor per bank under the DICGC scheme. Rao said that while full insurance cover could help prevent bank runs, it may also create a moral hazard, encouraging lenders to take greater risks.
He also supported the idea of risk-based premiums for deposit insurance, under which banks taking higher risks would pay higher premiums, promoting financial stability and fairness in the banking system.
