Insights by Joy

18-11-19
Mumbai.

"Govt set to hike insurance cover for bank deposits; FM" was one of the headlines on the front page of Times of India dated 16-11-2019. As per the report Finance minister, Nirmala Sitaraman on Friday said that the Government is set to raise the insurance cover for bank deposits beyond the current level of Rs. 1 lakh. The report goes on to state that while the deposit insurance extended in India covers 70 % of the depositors in terms of number, only 7.8 % of the deposit base comprises deposits below Rs 1 lakh.

This article attempts to throw some insights into the matter of Insurance of bank deposits in India.

Insurance of Bank Deposits


1Insurance of bank deposits

The idea of deposit insurance for banks originated in India only after independence. The trigger was the failure of certain banks in the 1960s. The Deposit Insurance and Credit Guarantee Corporation Act was passed in parliament on 21-8-1961.
The Deposit Insurance and Credit Guarantee Corporation (DICGC) was formed on 15 July 1978 under DICGC Act 1961, as a fully owned subsidiary of RBI. The head office of DICGC is presently situated in Mumbai and the current Chairman is Shri. B.P. Kanungo, who is one of the Deputy Governors of RBI.
DICGC insures deposits of customers up to Rs. 1 lakh per account holder under the Deposit insurance scheme. This insurance covers all Commercial banks and Co-operative banks. DICGC insures all Demand and Term Deposits, that is, Saving deposits, Current deposits and all types of fixed deposits.

DICGC coverage is mandatory for all banks operating in India. As per DICGC 2098 banks including 1941 co-op banks were insured as on 31-03 19. The premium paid by banks is to be born by the Insured bank and cannot be passed on to customers. On liquidation of a bank, depositors' list is prepared and sent to DICGC. After scrutiny, DICGC pays Rs. 1lac or actual amount, whichever is less.
The coverage originally started with Rs 5000 in 1962 was subsequently raised to Rs 30000. The coverage was raised to Rs 1 lakh with effect from 1-5-1993 and continues to be the same.
Any upward revision of deposit insurance coverage will be good news for bank depositors.

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To read full article on Deposit Insurance visit http://educationandconsultancy.com/deposit-insurance-in-india/

Deposit Insurance in India - Banking Education for Bank Jobs “Govt set to hike insurance cover for bank deposits; FM” was one of the headlines on the front page of Times of India dated 16-11-2019. As per the report Finance minister, Nirmala Sitaraman on Friday said that the Government is set to raise the insurance cover for bank deposits beyond the curren...