Highly placed sources in the Reserve Bank said that a few days back, a meeting was held in the central bank under the chairmanship of the RBI deputy governor Jagdeesh Capoor to finalise the restructuring of the DICGC.

According to the plan, the DICGC will charge differential rate of premium to banks breaking away from the current system of uniform premium. The quantum of premium will vary depending on the strength of the banks. For instance, a strong bank like the State Bank of India will be required to pay lower premium to insure its deposits than a weak bank like Indian Bank or Uco.

Even though most of the public sector banks have walked out of credit insurance, there is no change in the business profile of the deposit insurance arm of the RBI outfit.

The central bank also wants to insure depositors' money with the non-banking finance companies (NBFCs) in the restructured DICGC. However, this cannot be done immediately. "Over a period of time, strong NBFCs will be brought under the ambit of DICGC. The companies with a proven track record will only be insured and that too at a high premium," sources said. The CM Vasdudev Committee on NBFCs has ruled out immediate insurance cover for the NBFCs.

Several models from various countries are being studied for restructuring DICGC. "The objective is to protect the depositors so that they get back his money as fast as possible," a source familiar with the DICGC restructuring process told The Financial Express.

Sources close to the RBI pointed out that there are banks in the private sector which have been in a precarious situation and the interest of the depositors need to be looked after.

Under the proposed rules, the DICGC can strip the assets of the bank which has failed and sell it off at the maximum possible price to potential buyers. This will effectively speed up the liquidation process and ensure recovery of funds owned to depositors and creditors. Sources pointed out that there are still small hitches in the recast of DICGC which are to be sorted out.

"Normally secured creditors like banks and institutions are given priority. This issue is being looked into and the central bank is trying to give priority to the depositors," the source said.

Deposits in the non-banking sector will be insured under the remodelled DICGC but certain terms and conditions will be attached and the premium will be high to secure such deposits.

According to sources, a team consisting of executives of the RBI, financial institutions like the ICICI and banks is being sent to Manila in the last week of October to attend a seminar on bankruptcy laws. The team will study particularly the Malaysian and Thailand experience of the bankruptcy laws in the banking sector. Sources pointed out that new bankruptcy laws in the banking sector had worked well in both these countries.