The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly-owned subsidiary of the Reserve Bank of India (RBI), established to provide insurance protection to bank deposit holders. In the event of a bank’s failure, the DICGC insures depositors by covering their deposits up to a specified limit.
Under DICGC’s insurance cover, up to ₹5 lakh (including principal and interest) per depositor per bank is guaranteed. This limit applies regardless of the type of deposit—whether it is a savings account, fixed deposit, current account, or recurring deposit.
Objective of DICGC
DICGC operates to benefit the small depositors by securing the public confidence relating to the banking system by provision of deposit insurance. Hence, in case of failure of a bank, DICGC undertakes to compensate small depositors by repaying them the amount deposited in any bank. All commercial banks including foreign, local, co-operative banks and regional banks are covered by theDeposit Insurance and Credit Guarantee Corporation (DICGC).
Features of DICGC Guarantee
- Every depositor is provided with Rs.1 lakh guarantee for both the principal and interest amount.
- If the customer has accounts in various banks, all the accounts will be insured for Rs. 1 lakh each.
- If the customer has access to more than one account in a bank, all the accounts will be considered as one account.
- The depositors or customers can avail the benefits of the deposit insurance for free of cost.
- On the other hand, the deposit insurance premium is paid by the insured banks to the DICGC.
- DICGC is endowed to cancel the registration of an insured bank if the bank does not pay the premium for three continuous half-year periods.
- DICGC can also restore the registration of a bank if the bank makes requests for restoration after payment of all overdue premiums.
Types of Deposits Covered
All bank deposits are insured by DICGC. They are saving deposits, current deposits, recurring deposits, etc. The following deposits are not covered by this scheme.
- Deposits made by the foreign Governments
- Deposits made by the Central/State Governments
- Inter-bank deposits
- Deposits made by the State Land Development Banks with the State co-operative banks
- Any amount due and deposit received outside India
- The amount that is spared by the corporation with the previous approval of the RBI
Maintenance of Funds
The funds that are maintained by the Corporation are as follows.
- Deposit Insurance Fund
- Credit Guarantee Fund
- General Fund
The Deposit Insurance Fund and the Credit Guarantee Fund are funded by the insurance premia and by the guarantee fee. These funds are used to compensate the respective claims. The General Fund is used for the establishment and administrative expenses of the Corporation. The balance amount from these three funds is funded to the Central Government securities. The income received from such investments are credited to the respective funds.
FAQs
Coverage of DICGC?
- Commercial Banks – Includes public, private, and foreign banks operating in India.
- Co-operative Banks – Covers central, state, and urban co-operative banks.
- Regional Rural Banks (RRBs) – Ensures protection for depositors in rural banking institutions.
- Local Area Banks (LABs) – Smaller regional banks also come under its purview.
How DICGC Works?
- Registration of Banks: Banks operating in India are required to register with DICGC to offer deposit insurance. Once registered, they receive a certificate confirming the coverage.
- Premium Payment: Banks pay DICGC a fixed premium to ensure their deposits. The premium is not charged to depositors.
- Insurance Limit: If a bank becomes bankrupt, depositors are reimbursed up to ₹5 lakh, regardless of the total amount of their deposits in the bank.
- Claim Process: In case of a bank failure, the bank’s liquidator submits claims on behalf of depositors to DICGC. After verification, DICGC releases the insured amount to depositors through the liquidator.
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