The monetary and banking regulator, Reserve Bank of India, has released data which show that bank fixed deposits amounting to Rs. 38 lakh crore are not covered by the Deposit Insurance and Credit Guarantee Corporation (DICGC). It means that, as on September 2011, about 67 percent of the total term deposits in banks are lying uninsured.
A year before that, in the year 2010, the amount of uninsured deposits was Rs. 32 lakh crore. The decline in insurance coverage provided to bank fixed deposits is attributed to the rise in the amount of high value deposits in banks. The DICGC provides insurance coverage to bank fixed deposits up to Rs. 1 lakh on each account. It means that in case a bank becomes insolvent, each of its depositors will still be able to recover Rs. 1 lakh from DICGC.
According to industry experts, this policy needs revision in the limit of the insurance coverage provided. The insurance cover of up to Rs. 1 lakh on each account was put in place in the year 1993. With the high inflationary rate, averaging about 6.5 percent in the previous two decades, a deposit of Rs. 1 lakh can be considered equal to Rs. 3.3 lakh at the prevailing prices.