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Insurance Corporation For Indian Banks

What is DICGC?


The Reserve Bank of India in 1978 formed Deposit Insurance and Credit Guarantee Corporation (DICGC) as a fully owned subsidiary under the Deposit Insurance and Credit Guarantee Corporation Act, 1961 for the reason to provide insurance of deposits and credit guarantee scheme.

DICGC assures that maximum of ₹5,00,000 for each user for both principal as well as on interest amount is insured, i.e. DICGC provides deposit insurance protection cover scheme to the depositor incase if bank fails.


If the customer has accounts in different banks, they all are summed up as a single account and protection cover is applied to that single account.

The premium paid by the banks to the Corporation is required to be soak up by the banks themselves so that the benefit of deposit insurance protection is made accessible to the depositors free of cost.


In other words, the financial liability on account of payment of premium should be swallowed by the banks themselves and should not be passed on to the depositors.

The corporation holds the power to cancel the insurance scheme for a bank if it fails to pay premium for three consecutive half-year period, if banks requests and pays the premium with interest it also holds the power to restore the registration for same.

The DICGC makes the payment of the eligible amount to the chief executive officer of the insured bank, for payout to the depositors. No payment is made directly to the depositors. However, the amounts payable to the untraceable depositors i.e. those in respect of whom necessary information is not available, are held back till the chief executive officer is in a position to deliver all the necessary particulars.


DICGC Covers all types of banks in India which follows the guideline of the Reserve Bank of India, and has bought the deposit cover scheme from them. Financial Sector Legislative Reforms Commission (FSLRC) suggested and redraft the legal-institutional architecture of the Indian financial sector, on behalf of the Government of India, Ministry of Finance, in March 2011.


In its report the FSLRC suggested a regulatory structure consisting of seven agencies incorporating a deposit insurance-cum regulatory agency.


Framework

The supervision of the Corporation entrusts with its Board of Directors, of which a Deputy Governor of the RBI is the Chairman, the Board comprise of;

• The Chairman

• 1 Officer (rank of Executive Director) of the RBI

• 1 Officer from the Central Government of India

• 5 Directors recommended by the Central Government in consultation with the RBI

• 3 persons with special knowledge of commercial banking, insurance, commerce, industry or finance.

• 2 persons with experience in co-operative banking and directors should not be an employee of Central Government, RBI, Commercial or co-operative bank.

• 4 Directors, nominated by the Central Government along with RBI, with expertise in respect of accountancy, agriculture and rural economy.


Current Chairman of DICGC is Dr. M.D. Patra Deputy Governor, the Reserve Bank of India, Mumbai


Insurance Coverage

Initially, the insurance cover was limited to Rs.1,500 only per depositor for deposits in all the branches of the bank together. However, the Corporation to raise this limit with the prior approval of the Central Government. Therefore, the insurance limit was enhanced from time to time as follows:

• Rs.5,000 from 1st January 1968

• Rs.10,000 from 1st April 1970

• Rs.20,000 from 1st January 1976

• Rs.30,000 from 1st July 1980

• Rs.1,00,000 from 1st May 1993 onwards.

• Rs.5,00,000 from 4th February 2020 onwards.


DICGC covers all bank deposits, such as saving, fixed, current, recurring, etc. except the following types of deposits;

• Deposits of foreign Governments

• Deposits of Central/State Governments

• Inter-bank deposits

• Deposits of the State Land Development Banks

• Account with dues and deposit received from outside India

• Any amount which has been particularly exempted by the RBI 

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