Deposit Insurance – DICGC

Introduction

The Deposit Insurance and Credit Guarantee Corporation or also called DICGC is referred to as a fully owned subsidiary of RBI or the Reserve Bank of India. It offers deposit insurance, which acts as a safeguard for bank customers in the event that the institution goes bankrupt or fails to return the invested money to its depositors.

The agency covers various types of bank deposit accounts, including current, savings, fixed, as well as recurring deposits, up to a ceiling of 5 lakh rupees per account owner per institution. If a person deposits more than 5 lakh rupees in a commercial institution, DICGC will pay just 5 lakh, comprising interest and principal, in case the bank goes bankrupt.

Working and Framework Of DICGC

• Depositors’ money is protected by DICGC throughout all commercial as well as international banks operating in India; federal, urban co-operative, as well as state banks and regional rural banks, presuming the bank has elected for DICGC coverage.
• DICGC is now a completely owned subsidiary of the RBI. The organization’s principal goal is to ensure cash deposits as well as deliver assurance on bank lending facilities to a limited section of people. Every bank presently operating in India is required to participate in the deposit insurance system.
• The Deposit Insurance and Credit Guarantee Corporation manage three kinds of funds: the ‘Credit Guarantee,’ the ‘General’, and the ‘Deposit Insurance’. 
• The bank deposit insurance program is supported by insurance premiums collected from banks, whereas the credit guarantee scheme or fund is supported by guarantee fees collected at the period of credit issue. 
• The above-mentioned funds are utilised to pay disputes that arise in their respective sectors. 
• The general assets or funds are used to keep the organisation running and to cover other administrative costs.
• Any surplus money from either of these 3 types of funds is reinvested in government securities solely as authorised by the Deposit Insurance and Credit Guarantee Corporation Act of 1961. 
• Furthermore, any profit from these kinds of holdings is contributed to these reserves. The company has the authority to move money from one type of fund to the other.

Banks under DICGC for Insurance Facilities

Banks that come under DICGC for bank deposit insurance facilities are as follows:

• Co-operative Banks – 

• Most co-operative banks operating in various union territories and states have made relevant amendments to their regional Co-operative Societies Act, granting the RBI the authority to issue certain orders that are covered under the deposit insurance and credit guarantee corporation schemes.

• Commercial Banks – 

• Currently, the DICGC plan insures the entire commercial banking system in our country.
•  Commercial banks in our nation include divisions of international banks and also nationalized/local banks and regional rural banks.

List of Deposits Insured by DICGC

With the exception of the deposits expressly stated below, most deposits, including fixed, savings, recurring, current and so on, are typically guaranteed by the DICGC.

• All deposits undertaken by foreign governments.
• Deposits made by the Union Government or any other State Governments.
• Deposits done with any cooperative bank by a State Land Development Bank.
• On any sum owed as a result of a deposit collected outside of the country, regardless of its size.
• Interbank deposits of many types.
• With prior clearance from the RBI, the corporation may expressly exclude any deposit.

DICGC Accreditation

When a bank registers with the deposit insurance and credit guarantee corporation, the agency issues the bank a published certificate displaying details on the DICGC coverage granted to insured bank customers. Customers who have any doubts can get clarification from bank staff.

The Payment of Premium

Banks that hold deposits are obligated for the deposit insurance premium. This implies that a bank’s customers or depositors would be available for free if insured.

It is vital to remember that the Deposit insurance and credit guarantee corporation has the authority to cancel a bank’s membership if it refuses to deposit the premium for 3 successive half-year intervals. The bank could be re-registered upon request and payment of the outstanding premium plus interest.

Conclusion

According to the prologue of the Deposit Insurance and Credit Guarantee Corporation Act of 1961, its main target is to provide for the formation of an organization to ensure deposit insurance as well as assure credit facilities, and several other issues linked with or supplementary thereto.

As a result, the government needed to provide bank deposit insurance in the event that a bank failed in the long term in order to maintain public trust in the banking institutions as well as to further attract people to deposit excess reserves. As a result, the Deposit Insurance and Credit Guarantee Corporation created arrangements to provide insurance for up to one lakh rupees on deposits placed in banks.