Government considers hike in bank deposit cover

MUMBAI: The Centre is considering raising the insurance cover for bank deposits from the current limit of Rs 5 lakh, a senior finance ministry said on Monday.

Three days after the New India Co-operative Bank was placed under moratorium by the RBI for irregularities, department of financial services secretary M Nagaraju said a proposal for higher deposit insurance is under review. "The point about increasing insurance... that is under active consideration. As and when govt approves, we will notify it," he said at the press conference attended by finance minister Nirmala Sitharaman.

Economic affairs secretary Ajay Seth said the cooperative banking sector is well-regulated under RBI's watch and described the overall health of the sector as strong. He added that a crisis at one entity should not lead to doubts about the sector's stability, emphasising that it is the regulator's role to act against errant entities. Govt had hiked the insurance cover on deposits to Rs 5 lakh from Rs 1 lakh in 2020 after the 2019 PMC Bank crisis.

Sitharaman, who also met bankers here, reiterated commitment to the fiscal deficit path set in the July Budget, aiming below 4.5%. She highlighted reforms aimed at bolstering manufacturing, enhancing ease of doing business, and improving social infrastructure. "We won't stop with it. The momentum of reforms shall continue. Newer areas are also being opened up, and that's why in the last two years we have been seeing investment in the space, nuclear sector, etc."

"I expect that even state govts will come forward to promote ease of business," she added.

According to Sitharaman, the Budget has maintained sectoral allocations, with the effective capital expenditure for the next fiscal estimated at over Rs 19 lakh crore. She said the PM Narendra Modi-led govt's "big shift in Budget-making" is ensuring a responsible approach to handling taxpayers' money, with borrowings directed towards capital asset building. "If we borrow, we borrow to build," she said, adding that govt borrowing to bridge the fiscal deficit is almost equal to the spending on capital expenditure.

Addressing the issue of tariffs, she said, "We are building to be an investor-friendly country, and as a result, the duty cuts and the rationalisation that have been announced is a continuing process, and we shall keep doing that."

During her meeting with stakeholders, FM also launched the Mutual Credit Guarantee Scheme for MSMEs to facilitate loans of up to Rs 100 crore for purchasing machinery or equipment without collateral.

She also handed over keys to homebuyers who have benefitted from SWAMIH (Special Window for Affordable and Mid-Income Housing), a govt-backed scheme, to finance stuck housing projects.