Context:
The Union government is considering increasing the bank deposit insurance limit from the current ₹5 lakh to potentially ₹10 lakh. Deposit insurance is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), covering deposits in commercial and cooperative banks.
DICGC and the Deposit Insurance Amendment
Background
The Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly owned subsidiary of the RBI, has initiated verification and certification of claims from 55 insured Urban Co-operative Banks (UCBs) placed under All Inclusive Directions (AID). This is to ensure that depositors receive insured amounts (up to ₹5 lakh) within 90 days, as mandated by the DICGC (Amendment) Act, 2021.
Key Objectives
- Ensure time-bound access to insured deposits for depositors
- Strengthen depositor confidence in banking system stability
- Promote transparent resolution in bank moratorium cases
- Prevent long delays in payment of insured deposits during liquidation or reconstruction
About DICGC
| Feature | Details |
|---|---|
| Established | 15 July 1978 |
| Governing Act | DICGC Act, 1961 |
| Ownership | Wholly owned by RBI |
| Jurisdiction | Ministry of Finance, Government of India |
| Insurance Limit | ₹5,00,000 per depositor (principal + interest) |
| Coverage | Savings, fixed, current, recurring deposits in insured banks |
Banks Covered by DICGC
- Insured:
- All Commercial Banks (including foreign bank branches in India)
- Regional Rural Banks (RRBs)
- Local Area Banks
- Co-operative Banks (urban, state, central)
- Not Insured:
- Primary Cooperative Societies
- Deposits of foreign governments, central/state governments
- Inter-bank deposits
- Deposits from outside India
- Land Development Banks with state co-op banks
What DICGC Insures
- All domestic bank deposits except:
- Government and interbank deposits
- Overseas deposits
- Deposits specifically exempted by RBI and DICGC
Claim Settlement Procedure
- Moratorium/Closure Initiated: Bank placed under moratorium or liquidation
- List by Liquidator: Official liquidator must submit insured depositor list within 3 months
- DICGC Payment: Pays depositors within 2 months of receiving verified list
- Bank Repayment: Bank must repay DICGC the amount disbursed
Key Features of DICGC (Amendment) Act, 2021
1. Section 18A – Interim Payments
- Allows interim payments up to ₹5 lakh if a bank is under restriction or moratorium
- Effective from September 1, 2021
- Timeline:
- 45 days: Bank must furnish list of depositors
- 30 days: DICGC verifies details and confirms depositor consent
- 15 days: DICGC disburses the payment
2. Applicability
- Applicable to past and future restrictions imposed under Banking Regulation Act, 1949
- Not applicable if:
- RBI lifts restrictions
- Bank can repay depositors without DICGC help
3. Extended Liability Window
- RBI may allow 90-day extension if reconstruction/merger scheme is pending
Premium and Repayment Provisions
| Aspect | Provision |
|---|---|
| Premium | Paid by insured banks annually |
| Cap | 0.15% of total deposits (can be raised with RBI approval) |
| Repayment by Bank | Must repay DICGC on terms set by Board |
| Penal Interest | Up to 2% above RBI repo rate for delays |
