Insurance cover on bank deposits to be raised from Rs 1 lakh: FM Sitharaman

Finance Minister Nirmala Sitharaman
The government is planning to bring in laws to regulate multi-state cooperative banks and raise the insurance cover on bank deposits from the current Rs 1 lakh, Union Finance Minister Nirmala Sitharaman said on Friday.

In an interaction with the media, Sitharaman said the Centre and the Reserve Bank of India (RBI) were examining if the proceeds from the attached properties of the PMC Bank promoters could be used to compensate depositors.

The minister said the Centre wanted telecom companies to flourish and be able to grow their businesses in India, and relief measures for the sector would be decided by the committee of secretaries. 

When asked about stress in the telecom sector, Sitharaman agreed. “We want all companies to be able to do their business.”

Two major telecom companies — Vodafone India and Airtel — have posted a combined quarterly loss of about Rs 74,000 crore as they were hit by statutory dues after a recent Supreme Court ruling. Sitharaman said secretaries in her ministry had participated in the meeting of the Committee of Secretaries on telecom headed by Cabinet Secretary Rajiv Gauba and the government was taking feedback from the stakeholders in the sector.

“We are asking telecom companies what we can do. There is stress in the sector. On top of it is the Supreme Court order. We have to understand the implications of the judgment. A lot of factors are at play here,” she said, adding that the committee had not taken a final decision yet.

She also said four housing projects in three cities were in the process of coming under the real estate alternative investment fund announced by the Centre. “Work is progressing fast on that,” she said.

“I want to get Cabinet approval and hope to bring in this winter session (of Parliament) itself processes to amend laws to make sure that banking functions by cooperative organisations which take deposits be brought under the Banking Regulation Act,” Sitharaman said. 

Though she did not specify which Acts would be amended, the Cooperative Societies Act can be one of them.

These pieces of legislation assume significance in the wake of the scam at the Punjab and Maharashtra Cooperative Bank, affecting customers, who are facing difficulties in withdrawing their entire money due to restrictions imposed by the RBI.Deposit Insurance and Credit Guarantee Corporation gives bank depositors insurance cover of Rs 1 lakh. The finance minister hinted that the cover could be raised as part of the revamped Financial Resolution and Deposit Bill.

Sitharaman also said the government had no plans to cut spending on welfare schemes and would encourage all the departments of the Union government to spend the amounts provided in the Budget.

In a bid to boost the real estate sector, which is sitting on a large inventory of unsold and incomplete projects, the government is setting up Category II Alternative Investment Fund (AIF) to provide last-mile funding to the sector. The Centre plans to invest Rs 10,000 crore in the fund, while Rs 15,000 crore will be pooled from domestic institutions such as LIC and State Bank of India.

  • Too early to say if the slowdown in the economy has bottomed out
  • Hope to get cooperative banks under the Banking Regulation Act in the coming winter session
  • Examining if attached assets of PMC Bank promoters can be used to compensate depositors
  • 4 housing projects from 3 cities coming in under real estate AIF

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