Deposit Insurance for Bank Deposits- DICGC and Banks
Deposit Insurance and Credit Guarantee Corporation popularly known as DICGC is a financial institution that offers insurance protection to the deposit account holders of banks in India. The DICGC is a wholly owned subsidiary of the Reserve Bank of India (RBI), the banking regulator of India. The Deposit Insurance and Credit Guarantee Corporation through its insurance coverage for bank deposits ensures financial stability to the country by securing the confidence of the public in the Indian banking system. DICGC boosts the confidence of small depositors thereby enlarging the universe of the population opting for formal banking system.
Are all banks in India covered by DICGC?
DICGC insures the deposits with Commercial Banks. The deposits with following banks are eligible for deposit cover by DICGC.
• Scheduled Commercial Banks
• Branches of foreign banks functioning in India
• Local Area Banks
• Regional rural Banks
• Co-operative Banks (Co-operative Banks would be covered only if the local Co-operative Societies Act authorizes the RBI for certain specific powers. As of now, all Co-operative banks are covered.)
However, deposit insurance by the DICGC is not offered for deposits of public with Primary Co-operative Societies.
What are the Deposits covered by the DICGC?
DICGC extend insurance cover for the following types of deposits with the types of eligible banks mentioned above.
• Savings Bank deposits
• Current account deposits
• Fixed / Term deposits
• Recurring deposits
However, the following types of deposits are not eligible for insurance coverage
• Deposits of state/ central / foreign governments
• Interbank deposits
• Deposits of State Land development banks with Co-operative banks
• Any amount due on account of and deposit received outside India
• Any amount in deposits specifically exempted by the Corporation.
What is the maximum amount eligible for insurance coverage by DICGC?
Each depositor in a bank is eligible for insurance coverage for deposits subject to a maximum ceiling of Rs. 5,00,000 (Rupees five lakhs). The coverage is inclusive of principal amount and interest. The coverage will be applicable for a depositor for the deposits held by him in the same ownership /right/ capacity as on the date of liquidation/cancellation of bank's licence or the date on which the scheme of amalgamation/merger/reconstruction comes into force.
How is the DICGC insurance ceiling of Rs. 5,00,000 calculated?
For the above purpose, deposits with different branches of the same bank will be aggregated and the maximum ceiling of Rs. 5,00,000 will be applicable. For considering the coverage, deposits held in same ownership or same rights or same capacity are aggregated, even if they are in different types of accounts.
Separate insurance ceilings will be applicable for
• Deposits held in different types of ownerships/ rights (even if in the same bank)
• Deposits held in different banks.
Therefore, an individual will be eligible for deposit insurance coverage for Rs. 15,00,000 if he deposits Rs. 5,00,000 each in three different banks. However, the ceiling applicable will be only Rs. 5,00,000 even if the deposits are with three different branches of the same bank. Further, as the principal amount itself is Rs. 5,00,000 each, the accrued interest will not be covered under the insurance. If a depositor wants the coverage for the principal and interest, then the amount of deposit and interest together with a bank shall not exceed Rs. 5,00,000.
It may be noted that deposits held in Savings Bank, Fixed Deposits, recurring deposits etc in the same capacity will be aggregated for arriving at the applicable coverage. However, deposits held in different capacities like individual, as a partner in a partnership, as a director of a company, as a guardian of a minor etc will be considered separately and insurance ceiling of Rs. 5,00,000 each will be available for each type of ownership/ right.
In respect of joint accounts, all accounts with the same bank will be treated as in same capacity, if the names are appearing in the same order, even if the accounts are under different types of accounts. However, if the names are appearing in different order, the accounts in joint names are considered held in different capacity.
Is the DICGC insurance premium borne by the depositor?
The DICGC insurance premium has to be borne by the respective banks and is not passed on to the depositor.
How can a depositor know whether his bank is covered under DICGC?
The DICGC while enrolling banks as insured banks provides them with printed leaflets for display. The leaflets cover information relating to the protection extended by the Corporation. Depositor may also enquire with branch officials in this regard.
In order to support better identification, insured banks have been directed by DICGC to display its logo and QR code linked to DICGC website prominently in the website of the bank and internet banking portal. The display is mandatory from September 1, 2023.
It may be noted that deposit insurance coverage is compulsory and no bank can withdraw from the coverage. However, the Corporation may cancel the registration of an insured bank if it fails to pay the premium for three consecutive periods. Such cancellation will be notified through newspapers Registration of an insured bank with DICGC will cease if the bank is prohibited from receiving fresh deposits or license is cancelled by the RBI. In such cases too, insurance coverage on deposits will be valid till the date of such withdrawal/cancellation.
