DICGC -Deposit Insurance and Credit Guarantee Corporation

Economic literature points out that deposit insurance is not insurance of deposits per se but insurance against instability in the system consequent upon the failure of one or more banks.

Insurance of bank deposits is intended to give a measure of protection to depositors, particularly the smaller depositors, from the risk of loss of their savings arising from bank failures. Such protection infuses confidence in the minds of the public and contributes to the growth of the banking system by assisting in development of banking habits and mobilization of resources by the bank. These resources in turn can be utilized for purposes which are accorded national priority. Establishment of the Deposit Insurance Corporation came in the wake of certain bank failures in fifties and early sixties and consequent efforts to restore the confidence of the depositing public in the banking system by safeguarding their interests.

The Indian Counterpart of US's FDIC ( Federal Deposit Insurance Corporation)

Deposit Insurance Scheme Institutional Coverage:
The deposit insurance scheme was introduced with effect from 1 January 1962. The Scheme provides automatic coverage for deposits of all commercial banks (including regional rural banks) received in India. Following an amendment to the Deposit Insurance and Credit Guarantee Corporation Act in 1968, similar coverage is also extended in respect of deposits with co-operative banks in such of the states, as have passed the enabling legislation amending their local co-operative societies Acts. In terms of geographical coverage, the benefit of deposit insurance now stands extended to the entire banking system leaving uncovered only 69 cooperative banks in such of the states as have yet to pass the necessary legislation.

Extent of Insurance cover:
Under the scheme, in the event of liquidation, reconstruction or amalgamation of an insured bank, every depositor of that bank is entitled to repayment of his deposits in all branches of that bank, held by him in the same capacity and right, subject to a monetary ceiling of Rs.1,00,000/-.
Insurance premium:
The consideration for extension of insurance coverage to banks is payment of an insurance premium at the rate of 5 paise per annum per hundred rupees. The premium is collected at half-yearly intervals. The banks are required to bear this fee so that the protection of insurance in available to the depositors free of cost. The corporation can levy a maximum premium of up to Rs. 0.15 per Rs. 100 per annum.

Payment of Insurance claims:
When a bank goes into liquidation, the corporation pays to every depositor, through the liquidator, the amount of deposits up to Rs.1,00,000/-. When bank is amalgamated with an other bank and the scheme of amalgamation does not entitle the depositor to get credit for the full amount of his deposit, the corporation pays to each depositor the difference between the full amount of the deposit (or Rs.1,00,000/- whichever is less) and the amount actually received by him under the scheme of amalgamation. After settling a claim, the liquidator/transferee bank is required to repay to the corporation, by virtue of such rights of subrogation, recoveries effected by it from out of the assets of the insured bank in liquidation/amalgamation.

The Head Office of the DICGC is located at:
Marshall Building Annexe, 3rd Floor, Shooraji Vallabhdas Marg, Mumbai – 400 001
e-mail: dicgc@rbi.org.in
URL: http://www.dicgc.org.in/index.htm

It has branch offices at Calcutta, Madras, New Delhi and Nagpur.