People depositing money in the bank may get a big gift from the government in the Budget 2020 to be presented on 1 February 2020. Moreover, the banks will also be getting money for their recapitalisation.

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Taking lessons from the PMC Bank scam, the government is planning to give a big gift to the bank depositors in the Budget 2020. The government may increase the bank deposit insurance for existing up to Rs 1 lakh to insurance up to Rs 5 lakh, according to the sources in the government. The sources have further revealed that insurance coverage could also be linked to inflation. If this happens it will be big welcome news for the depositors.

According to the existing rules, irrespective of the amount of money a customer has deposited in the banks, he was entitled to an insurance cover up to Rs 1 lakh in the event of a bank failure or if the licence of that bank is cancelled. The government may also announce an infusion of Rs 1 lakh crore for the recapitalisation of banks in this budget.

The government may also give up to Rs 12,000 cr amount to three public sector insurance companies. The three state-run insurance companies viz, United India, Oriental Insurance and National Insurance are not in very financial health. The government is planning to invest at least Rs 12,000 cr in these three government companies and the announcement may come in the Budget 2020.

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This means that each of the three government companies could likely get Rs 3,000 cr. As per the guidelines of the insurance regulator - Insurance Regulatory and Development Authority of India (IRDAI) - the solvency ratio for a company should be greater than 1.5%. The solvency ratio for United and Oriental is close to the 1.5% mark while that of national Insurance has gone below 1%.