Economic Survey 2021-22: Only 51% deposits insured despite hike in cover

However, the figure is higher than the international benchmark of 20-30%

Even after increasing the deposit insurance to Rs 5 lakh from Rs 1 lakh, only about 51 per cent deposits are fully protected, though the figure remains higher than the international benchmark, the Economic Survey of 2021-22 said.

The survey, tabled in both the houses of the Parliament, said the total insured deposits were Rs 76.2 trillion as at end-March 2021 which was 50.9 per cent of the total assessable deposits which is Rs 149.7 trillion. This was higher than the international benchmark of 20-30 per cent, the Economic Survey observed.

When the deposit insurance was for Rs 1 lakh only, about 30 per cent deposits were covered. In the 2020-21 budget, the finance minister announced to increase the cover to Rs 5 lakh. With the increase in cover, the number of fully protected accounts were 247.8 crore at end-March 2021 which constituted 98.1 per cent of the total number of accounts which was 252.6 crore. This was against the international benchmark of 80 per cent, the survey noted.

Among bank groups, the percentage of insured deposits is higher for Regional Rural Banks (84%), followed by 70 per cent for cooperative banks, 59 per cent for State Bank of India, 55 per cent for all other public sector banks, 40 per cent for private sector banks and 9 per cent for foreign banks.

“Up to March 31, 2021, a cumulative amount of Rs 5,763 crore has been paid towards claims since the inception of deposit insurance (Rs 296 crore in respect of 27 commercial banks and Rs 5,467 crore in respect of 365 co-operative banks),” the survey said.

After the DICGC Act was amended last year which laid down a 90 days timeline for payment to depositors, over Rs 1,500 crore has been paid to over 120,000 depositors against their claims, as of early January 2022.

Commenting on the bad loans in the banking sector the survey while observing gross non-performing assets fell to 6.9 per cent as at the end of September 2021 from 7.5 per cent a year ago, standard restructured advances increased. Overall, the stressed advances ratio of commercial banks increased from 7.9 per cent at end-September 2020 to 8.5 per cent at end-September 2021.

“Overall, the banking system appears to have weathered the pandemic shock well even if there is some lagged impact still in the pipeline,” the survey said.

The survey highlighted overall improvement in the capital position of commercial banks, and said public sector bank’s capital adequacy ratio improved due to both government capital infusion and raising capital from the market.

“Based on the capital position as on September 30, 2021, all Public Sector and Private Sector banks maintained the Capital Conservation Buffer (CCB) well over 2.5 per cent,” the report said.

Commenting on loan growth, the survey observed it picked up sharply in December to reach an year-on-year growth of 9.2% as on 31 December 2021. Bank credit growth has been sluggish for the last two years.

The growth in non-food credit was mainly driven by personal loans and loans to the agriculture sector.

The report also observed that credit to industry which has been tepid for a long time is showing signs of improvement while deceleration in the services sector continued.