Bank deposits are slated to be most secure, thanks to the Deposit Insurance and Credit Guarantee Corporation (DICGC) which ensures stability in the banking system by providing deposit insurance, especially, to secure small depositors. The DICGC, a wholly-owned subsidiary of the Reserve Bank of India, functions under the provisions of “The Deposit Insurance and Credit Guarantee Corporation Act, 1961” (DICGC Act) and “The Deposit Insurance and Credit Guarantee Corporation General Regulations, 1961”. Put in place by the Reserve Bank of India (RBI), the DICGC also acts to ensure credit facilities and connected matters.
What does DICGC cover?
This Scheme covers all commercial banks including foreign banks’ branches functioning in the country. The local area and regional rural banks also benefit from this scheme. However, these banks must register themselves within 30 days of getting licensed by the RBI.
This scheme insures all deposits kept in savings, fixed, current and recurring accounts except
- Money deposited by foreign governments
- Deposits by Central or state governments
- Inter-bank deposits
- Deposits by the State Land Development Banks with the State co-operative bank
- Deposits due and received outside of the country
- Specified exemptions by the corporation post-RBI’s approval
Bank depositors’ money is insured for up to ₹5,00,000 for both the principal and interest amounts held by them on the date of the bank’s liquidation or cancellation of its licence or on the date it is getting merged with another bank or corporation.
Since the deposits in different banks are separately insured, bank account holders holding their deposits in more than one bank feel adequately secure as the deposit insurance coverage limit is applied separately to the deposits in every bank. This is because the customers’ funds in each bank are insured separately irrespective of when the bank would close down in future. The account holders do not have to shell out anything in services as the insured bank bears the cost of deposits insurance.
In case of liquidation or amalgamation of the bank, the DICGC pays the money to the liquidator responsible to pay the bank’s depositors. In the case of a bank merger, the transferee bank pays the amount to the depositors.