DICGC

  • February 19, 2021
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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DICGC

Context:

  • The government and the RBI are believed to be examining the feasibility of allowing depositors of banks, especially UCBs, under regulatory directions, to withdraw up to the ₹5 lakh insured amount to alleviate their misery.
  • At present, when a bank is placed under directions, deposit withdrawals are capped it ranges from ₹1,000 to ₹1 lakh of the total balance held by a depositor. This withdrawal cap is applicable for the entire period that a bank is under directions
  • The possibility of allowing deposit withdrawal up to the insured amount has brightened with the Deposit Insurance Fund (DIF) swelling to ₹1, 10,380crore at March-end 2020 from ₹93,750 crore at March-end 2019
  • Since April 1, 2015, 52 UCBs have been placed under All-Inclusive Directions by the Reserve Bank, per RBI’s Report on Trend and Progress of Banking in India 2019-20. Of the total claims settled by DICGC since inception, around 94.3 per cent of claims pertained to co-operative banks that were liquidated, amalgamated or restructured.
  • Government had recently upped the deposits insured by Deposit Insurance and Credit Guarantee Corporation (DICGC)from ₹1 lakh (fixed in 1993 when the insurance scheme was started) to ₹5 lakh following the PMC Bank fiasco of 2019

Concept:

  • Deposit insurance is a protection cover for deposit holders in a bank when the bank fails and does not have money to pay its depositors.
  • This insurance is provided by Deposit Insurance and Credit Guarantee Corporation (DICGC) which is a wholly owned subsidiary of the RBI.
  • DICGC insures all bank deposits, such as savings, fixed, current and recurring deposit for up to the limit of Rs 5 lakh per bank.
  • DICGC covers depositors of all commercial banks and foreign banks operating in India, state, central and urban co-operative banks, local area banks and regional rural banks provided the bank has bought the cover from DICGC.
  • The DICGC does not include the following types of deposits:
    • Deposits of foreign governments.
    • Deposits of central/state governments.
    • Inter-bank deposits.
    • Deposits of the state land development banks with the state co-operative bank.
    • Any amount due on account of any deposit received outside India.
    • Any amount specifically exempted by the DICGC with previous approval of RBI.
DICGC