Winning Bizness Desk

Mumbai. The central government is considering increasing the deposit insurance cover provided under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act. According to a finance ministry official, the insurance cover of ₹5 lakh per depositor could be raised. Under the current rules, if a bank collapses, depositors are insured up to ₹5 lakh, and this amount is reimbursed within 90 days.

Current Deposit Insurance Coverage

Presently, the government provides deposit insurance coverage of only ₹5 lakh. For example, if a depositor has ₹10 lakh in a bank and the bank fails, they will receive only ₹5 lakh under the insurance cover. The DICGC does not directly charge any premium from depositors; instead, banks pay the premium. This deposit guarantee is applicable only in case of a bank failure.

If a depositor has a total deposit of ₹4 lakh, they will get the entire amount back under the insurance scheme. However, if the government increases the insurance limit, depositors with higher balances will receive better protection.

Why Is the Government Considering an Increase?

The issue of deposit security has gained attention after financial irregularities were reported in the New India Cooperative Bank, causing inconvenience to customers. In recent years, depositors of Punjab & Maharashtra Cooperative Bank (PMC), Yes Bank, and Lakshmi Vilas Bank (LVB) also faced difficulties due to financial instability in these banks.

Increasing the insurance coverage will boost public confidence in the banking system. Depositors will be assured of higher security for their funds, leading to increased savings. In turn, banks will have access to more deposits, allowing them to extend more loans and contribute to economic growth.

Timeframe for Depositor Compensation

If a bank declares bankruptcy or goes under moratorium, depositors receive their insured amount within 90 days. The affected bank must submit depositor details to DICGC within 45 days, and within the next 45 days, the insured funds are credited to depositors' accounts.

How Do Depositors Get Their Money?

• If a bank collapses, DICGC first collects customer deposit information from the bank.
• DICGC then provides the insured amount to the affected bank.
• The bank credits the insured amount to customer accounts based on their deposits.

Which Banks Are Covered Under DICGC?

All commercial banks, including foreign banks operating in India, local area banks, and regional rural banks, are insured under DICGC.

How to Check If Your Bank Is Covered?

When a bank registers with DICGC, it receives an official printed document detailing the insurance coverage for depositors. Customers can inquire about their bank’s DICGC coverage by asking their bank branch officials.

What Is DICGC?

The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a subsidiary of the Reserve Bank of India (RBI) that provides insurance cover on bank deposits, ensuring depositor protection in case of bank failures.