A state-run State Bank of India (SBI) report on Monday said that the deposit insurance coverage in India is one of the lowest in the world.
A deposit insurance coverage ensures that the depositor gets a certain amount, before the bank pays other parties at the time of liquidation.
In India, deposits are insured up to Rs 1 lakh, while the comparable number for BRICS countries like Brazil and Russia stand at Rs 42 lakh and Rs 12 lakh, respectively.
“Data on Cross Country Deposit insurance Coverage limit shows that deposit insurance coverage in India is one of the lowest at Rs 1 lakh / $1508 / 0.9 times India’s per capital income, ” an SBI Ecowrap report said.
According to the report, another diverging trend that appeared pertained to the number of accounts – over 60 per cent of the total accounts are less than Rs 1 lakh, while around 70 per cent are less than Rs 2 lakh, and 98.2 per cent are less than Rs 15 lakh.
“So clearly, it seems on paper that the number of small depositors are adequately covered in terms of insurance cover, but in terms of quantum of deposits, we observe that percentage of deposits less than Rs 1 lakh is only 7.8 per cent of the deposit base,” the report said.
Besides, 20.4 per cent of the deposits are contributed by customers having deposits of more than Rs 15 lakh but less than Rs 1 crore, with average deposits of Rs 35 lakh.
Effectively, customers with balances between Rs 15 lakh and Rs 1 crore get protection only to the extent of 2.8 per cent of their deposits, though the premium is paid on the entire value of deposits held by them, the report added.