Banks in India have reached out to the Reserve Bank of India (RBI) to recommend an increase in the deposit insurance coverage for older depositors.

This approach stems from a collective decision taken by bankers during an internal meeting in September 2024.

This proactive approach highlights the banks’ commitment to addressing the financial security of senior citizens, who often rely on fixed incomes from their deposits.

For each insured bank the current limit on deposit insurance coverage is Rs 5 lakh per depositor.

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According to bank officials, senior persons, who are frequently the most vulnerable among depositors, should receive a boost in this amount. Since many elderly people only get income from their bank deposits, they are especially vulnerable to financial dangers. According to bank officials, variables such as inflation and life expectancy require regular changes in the coverage amount.

“We have had an informal discussion with the regulator and are now preparing a more detailed plan to present to both the government and the RBI within this month.” The Economic Times quoted a senior bank executive as saying.

Earlier in 2021, Parliament had passed the Deposit Insurance and Credit Guarantee Corporation (Amendment) Bill which stipulates that depositors of distressed banks would receive amounts up to Rs 5 lakh within 90 days, even if the RBI places a bank under moratorium. This amendment aimed to bolster depositor confidence following significant bank failures in recent years.

Previously in 2020, the government increased the coverage of deposit insurance from Rs. 1 lakh to Rs. 5 lakh with the intention of aiding depositors of failing banks like Punjab and Maharashtra Co-operative Bank. Reforms in regulations were also prompted by the financial difficulties that Yes Bank and Lakshmi Vilas Bank encountered in order to protect depositors.

It is now the RBI's responsibility to improve older people's financial stability by potentially altering the deposit insurance scheme. The RBI may encourage seniors to save more with banks and give them better financial security by expanding coverage specifically for them. This will also help the banking industry in the nation as a whole.