Page 53 - Banking Finance November 2025

FEATURES

Insured bank deposits fall 9.5

percentage points in 5 years

W hile India's bank deposit base has expanded, the since September 2021. This suggests that 2.44 per cent of
share of deposits protected by insurance has
bank deposits that hold over Rs. 5 lakh in them account for
slipped. In the five years between September
2020 and March 2025, assessable deposits swelled by over a large chunk of the assessable deposits.
Rs. 91 lakh crore, but the insurance coverage ratio dropped Who holds the risk?
by 9.5 percentage points, leaving a wide gap between small
RBI data as on March 31, 2024, show that payment banks,
savers who are fully covered and largevalue accounts that
which typically have less funds in their deposit accounts,
remain exposed.
have 99.2 per cent insurance coverage. Regional rural
banks, local area banks and co-operative banks, too, have
The ratio of insured deposits to assessable deposits had more than 60 per cent of their deposits insured. The
jumped to 50.92 per cent in 2020, when the Deposit
insurance coverage ratio is also a relatively healthy 48.9 per
Insurance and Credit Guarantee Corporation raised the
cent in public sector banks.
eligibility limit for deposit insurance from Rs. 1 lakh to Rs. 5
lakh per bank. But the ratio has been slipping steadily since
But private banks registered only 32.7 per cent insurance
and currently stands at a five-year low of 41.5 per cent.
coverage for their deposits since they have a larger number
of deposits with more than Rs. 5 lakh parked in them.
The decline appears to be CM YK mainly led by the increase
in high-value deposits in the system.
Foreign banks have the lowest insurance coverage, with only
5 per cent of their deposit holders covered. This implies that
The pandemic hit small businesses and the lower-income
95 per cent of their deposit accounts hold over Rs. 5 lakh.
groups harder, making their savings dwindle even as
wealthier entities witnessed growth in their assets. This
widening income disparity is evident in bank deposits. India and the World
Despite progress, India's insurance safety net lags behind
Assessable deposits soared from Rs. 150 lakh crore in 2020 advanced economies. At 41.5 per cent, its ratio trails the
to nearly Rs. 241 lakh crore in 2025, while insured deposits US (60 per cent) and Japan (63 per cent), with the European
grew by only Rs. 24 lakh crore. Union offering even greater shield, between 50 and 70 per
cent. China, at 46 per cent, sits closer, revealing a shared
In terms of the number of accounts insured, the ratio is challenge among emerging markets: How to protect
quite satisfactory, with 97.56 per cent of bank accounts depositors in systems where wealth is concentrated at the
currently insured. This ratio has remained above 97 per cent top. (Source: BusinessLine)

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48 | 2025 | NOVEMBER | BANKING FINANCE