RBI's low deposit insurance

Given the global economic downturn made me think that I should diversify my piggy bank. So I decided to move some of my savings back to India in case there was a run on the bank in the US. After much research two banks stood out State Bank Of India (SBI) and ICICI Bank. SBI, a public sector bank, being the largest bank in India by deposits and the bank in the world to operate the most branches (As of May 2008, the bank had 21 subsidiaries and 10,186 branches). ICICI Bank is the fastest growing commercial bank with a boat load of customer service equally competing with SBI and was the first to offer banking upto 8pm in the night in India. Traditionally banks close by noon in India. I remember when my mom spent most of her first saturday of a month going to various banks making deposits, paying bills etc. SBI was poor at customer service. It still is poor in my hometown (or so my parents say).

Nonetheless I decided to open non-resident accounts in both the banks. Then it hit me what if these banks had issue in being a going concern. So I researched the web to find out whether deposits are at all insured. Much to my surprise I found out that bank deposits in India are insured only upto Rs. 100,000 (1 lakh) under same right and capacity (read rbi's faq about this). Are you serious?

So if I have to secure say Rs. 10 Lakhs I have to open accounts in 10 different banks. In the recent economic boom in India I am sure there are lot of new crore-pathis (Rupee Millionaires or Billionaires) evovling and the number is only increasing. Do you guys know your money is only covered upto to peanuts by RBI? That if these crore-pathi's bank goes bankrupt and if I saved only 1L in my life then we are on the same boat? Why such a low insurance amount when inflation is peaking? Is it our ever increasing population? I did some research online and couldn't find a reason for this.

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