I have the same question myself.
Maybe PMC Bank is your first exposure to a bank failure but failures of cooperative banks have been happening in India for ages. Their depositors have had a mixed experience of getting their money back. I really don’t know how it works with coop banks.
There have been near failures of scheduled banks (so called public sector banks and private sector banks) as well in the past viz. Global Trust Bank, Bank of Madura. In the past, RBI has driven shotgun mergers of these near-failing banks with healthier public sector banks (e.g. Oriental Bank of Commerce) and private sector banks (e.g. ICICI Bank) and thereby ensured that the depositors of the nearly-failed banks did not lose their deposits.
Going by the past, it would appear that it’s safe to keep your money in a public sector bank or private sector bank.
But, as they say in financial services, past track record is no guarantee of future performance.
It’s also an old fact that deposits in public sector bank or private sector bank are insured only upto INR 1 lakh in India.
Should RBI (A) simply increase DICGC insurance cover on bank deposits to ~INR 5L per global benchmark & let the chips fall where they might as it happens abroad, OR (B) continue to protect 100% of bank deposits via "shotgun mergers" as it has been doing so far? pic.twitter.com/ED1NjVqdjh
— Ketharaman Swaminathan (@s_ketharaman) October 9, 2019
I don’t recall a time in the past when this point was ever mentioned in public discourse, which sorta gave the common man the EXTREMELY WRONG impression that 100% of their deposits in scheduled banks is safe.
But we’re increasingly hearing about the DICGC INR 1L insurance these days. I don’t know why. I also don’t know what’s safe and what’s not safe any more.