What is DICGC?
The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly-owned subsidiary of the Reserve Bank of India (RBI), established to provide insurance protection to bank deposit holders. In the event of a bank’s failure, the DICGC insures depositors by covering their deposits up to a specified limit.
Under DICGC’s insurance cover, up to ₹5 lakh (including principal and interest) per depositor per bank is guaranteed. This limit applies regardless of the type of deposit—whether it is a savings account, fixed deposit, current account, or recurring deposit.
Coverage of DICGC
The DICGC insurance scheme covers deposits in the following ways:
- Commercial Banks – Includes public, private, and foreign banks operating in India.
- Co-operative Banks – Covers central, state, and urban co-operative banks.
- Regional Rural Banks (RRBs) – Ensures protection for depositors in rural banking institutions.
- Local Area Banks (LABs) – Smaller regional banks also come under its purview.
How DICGC Works
- Registration of Banks: Banks operating in India are required to register with DICGC to offer deposit insurance. Once registered, they receive a certificate confirming the coverage.
- Premium Payment: Banks pay DICGC a fixed premium to ensure their deposits. The premium is not charged to depositors.
- Insurance Limit: If a bank becomes bankrupt, depositors are reimbursed up to ₹5 lakh, regardless of the total amount of their deposits in the bank.
- Claim Process: In case of a bank failure, the bank's liquidator submits claims on behalf of depositors to DICGC. After verification, DICGC releases the insured amount to depositors through the liquidator.
Advantages of DICGC
For Depositors
- Protection against bank failure: Depositors are assured of receiving up to ₹5 lakh of their deposits, even if a bank becomes insolvent.
- Broad coverage: The scheme covers deposits in almost all types of banks, including co-operative and regional banks.
- Trust in the banking system: The provision of deposit insurance gives confidence among the depositors to save money and invest in the bank.
For the Economy
- Financial stability: While protecting the depositors' rights, DICGC helps to sustain the stability.
- Encourages savings: With the security of deposit insurance, people tend to deposit more money in banks, thus promoting financial inclusion and liquidity in the economy.
Limitations of DICGC Coverage
- Coverage Limit: The present insurance cover is limited to ₹5 lakh. This may not be adequate for those with high net worth or even businesses with substantial deposits.
- Exclusions: Interbank and government deposits are not covered under the DICGC.
- Delayed Compensation: Though insured, the compensation process can take time, as claims are processed through the liquidator after bank failure.
Key Takeaways
1. Increase in Insurance Limit
In 2020, the deposit insurance limit was raised from ₹1 lakh to ₹5 lakh. This was a significant step taken after nearly three decades, aimed at enhancing depositor protection in light of several high-profile bank failures.
2. Faster Payout Mechanism
In 2021, the government amended the process to speed up the payout process. DICGC must pay within 90 days of receiving a claim from the liquidator, thus bringing relief to depositors much sooner.
3. Greater Awareness Campaigns
The RBI and DICGC have undertaken several measures to increase public awareness about deposit insurance, which encourages depositors to check if DICGC covers their bank.
