Top private lender, HDFC Bank has clarified that a declaration stamped on a passbook page saying deposits are insured for up to Rs 1 lakh, the photograph of which has gone viral on social media, was issued under a central bank directive of 2017.
The Reserve Bank of India (RBI) directed all banks by a notification on June 22, 2017, to inform customers of the deposit insurance scheme of the Deposit Insurance and Credit Guarantee Corporation (DICGC), a fully owned subsidiary of the RBI, the HDFC Bank has said, according to media reports.
The image had caused panic among bank customers as people thought it was some new regulation. The general impression that the country banking sector is under enormous stress from non-performing assets (NPA) added to the worries. The recent collapse of the Punjab and Maharashtra Cooperative Bank (PMC) also added to the panic.
"The deposits of the bank are insured with DICGC and in case of liquidation of the bank, DICGC is liable to pay each of the depositors through the liquidator. The amount of this deposit is up to Rs 1 lakh within 2 months from the date of claim list from the liquidator," the stamp read.
The HDFC Bank clarified: "This pertains to information about the deposit insurance cover. We would like to clarify that the information has been inserted as per RBI circular dated Jane 22, 2017 which requires all Scheduled Commercial Banks, all Small Finance Banks and Payment Banks to incorporate information about 'deposit insurance cover' along with the limit of coverage upfront in the passbook."
While the intention behind the clarification is generally appreciated, it could also exacerbate the worries of customers with deposits exceeding Rs 1 lakh. The customers of banks, which have received negative media coverage for various reasons, may become jumpy with this clarification.
The PMC Bank failure has already reignited the debate about the low insurance coverage for deposits. This could affect people's trust in banks, especially in the context of stress in the country's banking system.
Private lender Yes Bank, which has become a victim of negative mentions on social media, have moved the police including the cyber cell to investigate the fall in the share price attributed to the fraudulent spreading of fake news.
The bank authorities have urged the investigators to probe the short trades in the market that resulted in the shares falling from Rs 273 to Rs 42 in a matter of weeks. Another recent report said a person who had lost his job with the grounding of Jet Airways died of cardiac arrest apparently from the stress over the uncertainty of recovering about Rs 90 lakh he had parked with the PMC Bank that went bust recently.