From 1st December, bank customers in the United Kingdom will receive stronger financial protection if their bank fails. The United Kingdom (UK) has increased the limit of deposit protection. The Prudential Regulation Authority (PRA) has confirmed that the deposit protection limit under the Financial Services Compensation Scheme (FSCS) will increase from £85,000 to £120,000. £120,000 equals Rs. 1,39,99,536.00 Indian Rupee.
The previous limit of £85,000 (Rs.99,15,836.50) was set in 2017. The new limit of £120,000 (Rs. 1,39,99,536.00) is much higher than the earlier proposal of £110,000. It’s adjusted to reflect the latest inflation data and designed to strengthen customer protection in today’s economic environment.
In India, each depositor in a bank is insured upto a maximum of ₹ 5,00,000 (Rupees Five Lakhs) for both principal and interest amount held by him in the same right and same capacity as on the date of liquidation/ cancellation of bank’s license. The public in India has also requested the Government of India to increase the limit in view of recent turmoil in a few banks, such as Yes Bank and IndusInd Bank.
Why This Change Matters
The FSCS protects customers’ deposits if their bank, building society, or credit union collapses. With the new limit, depositors will now be covered for up to £120,000 per eligible financial institution. This will boost confidence in the public and they will deposit more money with financial institutions. If banks or any financial institution fail, then the public can get £120,000 easily from the Government.
Statements From Key Officials
Sam Woods, Deputy Governor for Prudential Regulation at the Bank of England and CEO of the PRA, said:
“This change will help maintain the public’s confidence in the safety of their money. Public confidence supports the strength of our financial system.”
Martyn Beauchamp, CEO of the FSCS, welcomed the increase, saying:
“Consumers can feel confident their money is safe, from the very first penny up to £120,000. Trust in financial services is vital for stability and growth.”
Rocio Concha, Director of Policy and Advocacy at Which?, said:
“Increasing the deposit protection limit is a sensible decision to support consumer confidence. This shows that strong consumer protection does not conflict with economic growth.”
Eric Leenders, Managing Director of Personal Finance at UK Finance, added:
“It is right to update the limit to reflect inflation. We will help banks implement the changes and ensure customers understand the new protections.”
Temporary High Balance Limit Also Increased
Along with the deposit protection limit, the UK is also increasing the limit for Temporary High Balances (THB) starting 1 December. The THB limit applies to money held temporarily after major life events, such as:
- Buying or selling a home
- Receiving an insurance payout
- Inheritance
- Divorce settlements
The THB limit will rise from £1 million to £1.4 million. To support the new protection limits, the PRA has updated FSCS disclosure requirements. This includes:
- Information sheets that banks must provide to customers
- Mandatory notices displayed inside bank branches
Banks and financial institutions have been asked to update all customer-facing FSCS information by May 2026.
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