Finance Ministry likely to increase deposit insurance limit from ₹5 lakh

Deposit Insurance Framework

• Deposit Insurance: Protects depositors’ funds in case of bank failure.
• Regulatory Authority: Deposit Insurance and Credit Guarantee Corporation (DICGC).

About DICGC (Deposit Insurance and Credit Guarantee Corporation):

Origins & Governance:

• Formed: 1978 (via merger of DIC & CGCI).
• Legal Framework: DICGC Act, 1961.
• Parent: RBI (fully owned subsidiary).

Deposit Insurance Scheme:

• Coverage: ₹5 lakh per depositor across savings, current, fixed, and recurring accounts; earlier ₹1 lakh (fixed in 1993; revised after PMC Bank collapse)
• Premium: 12 paise/₹100 deposit (paid by banks, not depositors).
• Frequency: Paid semi-annually based on previous half-year’s deposits. 

Coverage Details:

• Includes: Banks, RRBs, Local Area Banks, Foreign banks (branches in India), & Cooperative banks.
• Primary cooperative societies are not insured by the DICGC.

Types of Deposits covered: – DICGC insures all bank deposits, such as saving, fixed, current, recurring, etc. except the following types of deposits.

• Deposits of foreign governments and 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.

Funds Managed by DICGC:

• Deposit Insurance Fund: Insurance coverage for depositors if a bank fails. It is funded by premiums from banks.
• Credit Guarantee Fund: Ensures creditors get remedies if debtors default.
• General Fund: Covers DICGC’s operational expenses, funded by surplus from its operations.