How will deposit insurance help if a bank fails?

What are the new amendments passed in Parliament on credit guarantees and is it enough to protect consumers?

: The Union Cabinet last week cleared the . Under the new amendments, bank deposits of up to ₹5 lakh will be covered by the government in case a bank fails. Earlier, deposits of only up to ₹1 lakh were insured. The Bill also mandates that the Deposit Insurance and Credit Guarantee Corporation (DICGC) must return money owed to depositors within 90 days from when a bank fails. In the past, it has usually taken several years for affected depositors to get their money back. Deposit insurance offers protection to the deposits of bank customers in case a bank becomes insolvent. A bank becomes insolvent when its total liabilities exceed its total assets, usually as a result of poor investing or lending decisions. So an insolvent bank may not be able to make good on all of the money that it owes its depositors. In such cases, the government steps in to compensate depositors, usually up to a certain threshold amount. In India, the DICGC is the government agency in charge of protecting the interests of depositors when a bank fails. The DICGC regularly collects money from banks to fund a corpus that is used to compensate depositors if a bank fails. Banks have till now been paying 10 paise to the DICGC for every 100 rupees of deposits that they hold to avail deposit insurance for their customers. Now, after the fresh amendments, banks may be charged up to 15 paise for every 100 rupees. According to the Centre, the raising of the insured deposit amount now to ₹5 lakh means that 98.3% of all bank accounts and 50.9% of all deposit value will be protected by the government. Most countries across the world today offer deposit insurance to bank depositors.