Deposit Insurance and Credit Guarantee Corporation (DICGC)

Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly-owned corporation of The Government of India. Its main aim is to provide insurance to depositors having accounts in banks in India. This insurance provides a peace of mind to depositors that in the event of a bank failure, their deposits are secure and guaranteed by the government. We will talk about the relevant and important topics of DICGC from the perspective of depositors. . Topics include:

• DICGC Act
• History of DICGC
• Objective of DICGC
• DICGC ownership
• DICGC corporate structure
• DICGC Bank List
• DICGC Chairman
• DICGC branches
• DICGC claim settlement

DICGC Act

The DICGC Act came into power in 1962, and was modified in 2006. The act provides guidelines and mandates important topics like capital requirements, insurance premium, how capital will be paid to depositors in case of default, corporation fund, bank management, bank board of directors, registration of banks, circumstances under which a bank can wind up, RBI advances to banks, and more.

Banks operating in India are expected to follow the mandates under this act. You can read the entire act here.

History of DICGC

• India was one of the first nations in the world to introduce a deposit insurance scheme.
• The need for a deposit insurance scheme was felt by the Indian Government due to numerous bank failures in the country. Namely, the failure of the Travancore National & Quilon Bank in (Pre-independence), the Failure of the Palai Central Bank, and the Laxmi Bank.
• In light of these banking failures, the Parliament Of India passed the Deposit Insurance Corporation (DIC) bill in 1961. This act came into force on 1st Jan 1962.
• DICGC, as we know it today came into force after merging with Credit Guarantee Corporation Of India, thus forming the joint entity called deposit insurance and credit guarantee corporation (DICGC) in 1978. DICGC is a wholly-owned subsidy of The Reserve Bank Of India.

Objective of DICGC

• The primary objective of the DICGC is to insure small depositors in the event of a banking failure.
• The coverage amount has been revised in the 2020 budget from 1 lac to 5 lacs.
• This means depositors will be insured up to 5 lacs if their bank fails.

DICGC corporate structure

DICGC is headed by the Chairman, one officer from the Central Government, One officer from the RBI, and 5 additional
Directors.

DICGC Chairman

Dr. M.D. Patra (Deputy Governor of RBI) is the current acting Chairman of the DICGC. Dr. Patra has a Doctorate in Economics (Phd) along with doing postdoctoral research from the prestigious Harvard University in the USA. Dr. M.D. Patra has been a long-standing officer of the RBI, first joining the organization in 1985.

DICGC limit

Every deposit holder is insured by the DICGC up to an amount of Rs 5 lakhs. The principal, as well as the interest amount, is insured under the scheme.

DICGC Insurance (How to avail maximum benefit)

As mentioned above, each depositor is insured only to the extent of 5 lakhs. That being said, if you wish to increase the coverage of your deposits, you will have to split up the ownership or the banks, or a combination of both. Let us understand this with an example.

Example 1

Let us say you want to insure your Rs 10 Lakhs bank deposit. To ensure that your entire 10 Lakhs is insured under the DICGC Scheme, you can deposit Rs 5 Lakhs in bank 1 and another Rs 5 Lakhs in bank 2. This segrigation will ensure your entire Rs 10 Lakh deposit is covered under the DICGC scheme. Just ensure that both banks are covered under the DIGCG Scheme.

Example 2

Let us say you want to insure your Rs 10 Lakh deposit, but you don’t want to split the deposit across 2 banks. You can avail the DIGCG insurance if you deposit Rs 5 Lakhs in one person’s name and the other Rs 5 Lakhs in another person’s name.

You may use your spouse, children, parents, etc for splitting the deposit. You can also use joint names for splitting the deposit, for insurance, the first deposit will have your sole name, the second deposit will have your spouse’s name and your name (as joint account holder). You will ensure that your entire deposit amount is covered if you do this.

DICGC premium

The premium for the coverage is borne by the insured bank. It is probably that the bank collects this premium indirectly from its customers in the form of annual maintenance charges, withdrawal charges, and other similar fees.

DICGC bank list

Well over a total of 1800 banks are insured under the DICGC scheme. DICGC insures Public and Private sector banks, Foreign Banks, Small Finance Banks, Payment Banks, Local and Regional Banks, and Co-operative Banks. Find out whether your bank is covered under the DICGC (tool).

DICGC branches

The corporation has its head office in Mumbai, with 4 additional branches in the metropolitan cities of Nagpur, Chennai, New Delhi, and Kolkata.

DICGC claim settlement

• In the event of a bank failure, the failed bank will provide a list of covered deposits to the DICGC.
• Post this, the DICGC will vet the list and disburse the funds to a chief liquidator.
• The chief liquidator will then pass on the funds to the depositor.

Recent cases of claim settlements include the case of Pioneer Urban Co-operative Bank. The DICGC provided relief to 28382 depositors up-to-the amount of 34533904 in 2019.