India\'s Finance Minister Nirmala Sitharaman promises to raise bank depositors\' guarantee limit from current ₹1 lakh

Finance Minister Nirmala Sitharaman on Monday said that she is closely monitoring the developments at Punjab and Maharashtra Cooperative (PMC) Bank and the government could consider raising deposit guarantee limit from existing ₹1 lakh.

The Deposit Insurance & Credit Guarantee Corporation (DICGC) insures each depositor in a bank up to a maximum of Rs 1 lakh for both principal and interest as on the date of liquidation/cancellation of the affected bank's licence or from the date of amalgamation/merger.

In this context post the PMC Bank scam which has left depositors worried, the minister said she had discussion with RBI Governor Shaktikanta Das that if deposit guarantee of Rs 1 lakh can be released instantaneously. But he informed that the deposit guarantee is released after the bank is closed and can not be released if the bank is a going concern, she added.

Sitharaman also said if the deposit guarantee limit from existing Rs 1 lakh is raised, it will be through Parliament.

She said that the RBI Governor has assured that customers' interests will be protected.

The PMC Bank customers can now withdraw up to Rs 40,000 as the RBI enhanced limit late on Monday.

"The RBI Governor has assured me that he will keep the interest of customers in mind, and at the earliest try resolve and resolve it...I had discussion with RBI Governor this afternoon and I am closely monitoring it," she said earlier while addressing media after meeting heads of public sector banks here.

The PMC Bank went bust allegedly after its exposure to near-bankrupt realty player HDIL, to which it has loaned over 70 per cent of its Rs 9,000 crore in advances. But it was not made public in the audit or was provided for or was classified as an NPA.

"Government has been on its toes in terms of bringing the assets of these promoters (indulged in fraud) of the bank... process will not suffer for want of enough assets which can eventually help paying back customers. In fact my appeal to Governor this afternoon was if there are so many assets, is there anyway RBI can expedite in terms of paying to customers who are genuinely suffering," Sitharaman said.

Recently in wake of such crisis where common man deposits' are concerned, it is being demanded to raise the insurance limit. "The current upper limit of Rs 1 lakh per depositor, we believe, has outlived its shelf life and there is a need to revisit it," a State Bank of India research report, released earlier this month, said.

The report said the DICGC coverage should be revised and bifurcated into two categories - a desirable coverage of at least Rs 1 lakh for savings deposits which would cover around 90 percent of such accounts, and a desirable coverage of at least Rs 2 lakh for term deposits, which would cover around 70 percent of such accounts.