Reserve Bank of India Deputy Governor M Rajeshwar Rao has suggested full insurance coverage for bank deposits of senior citizens and small depositors. His proposal follows the heavy losses suffered by these groups during cooperative bank failures, including the Punjab and Maharashtra Cooperative Bank, where many retirees lost savings beyond the ₹5 lakh insurance limit.
Rao made this suggestion at a conference organised by the Deposit Insurance and Credit Guarantee Corporation in Jaipur. He said senior citizens and small investors deserve stronger protection as they are among the worst affected when banks collapse.
Deputy Governor J Swaminathan also proposed risk based pricing for deposit insurance instead of the current flat rate. Rao supported this idea, saying differential premiums would encourage banks to manage risks responsibly and ensure fairness in premium assessment. He added that several countries are moving towards Risk Based Premium systems to improve financial stability.
Rao’s comments came amid global banking troubles, including failures in the United States and Europe in 2023. He noted that while full insurance could prevent panic withdrawals and bank runs, it might also lead lenders to take undue risks. Calling it a suboptimal solution, Rao emphasised the need for balanced reforms that protect depositors while maintaining discipline among banks.
