The aim of the DICGC Act, 1961 is to provide for the establishment of a corporation for the purpose of insurance of deposits and guaranteeing of credit facilities and various other matters which are incidental to any event occurring DICGC Act.
Deposit Insurance and Credit Guarantee Corporation (DICGC) is a very old subsidiary of RBI which provides insurance to all the banks registered under the guidelines of the RBI Act.
The aim of the DICGC Act, 1961 is to provide for the establishment of a corporation for the purpose of insurance of deposits and guaranteeing of credit facilities and various other matters which are incidental to any event occurring DICGC Act. No insured banks can withdraw themselves from the DICGC coverage. The deposit insurance scheme is mandatory for all the banks.
Which banks are insured under DICGC?
All commercial banks including branches of foreign banks functioning in India, nationalized/local banks and RRB’s are insured by the DICGC. At present all the co-operative banks other than those from the Union Territories of Chandigarh, Lakshadweep, the State of Meghalaya and Dadra and Nagar Haveli are covered by the DICGC. Primary cooperative societies are also not insured by the DICGC. Deposit insurance premium is borne entirely by all the insured banks, respectively.
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What all comes under DICGC insurance?
It is important to know that the DICGC insures all the deposits such as savings, current, fixed, recurring, etc.
Deposits which are not covered are deposits of the foreign governments, deposits of the central or the state governments, deposits of the state land development banks with the state co-operative banks, various inter-bank deposits, any amount due on account of and deposit received outside India and any amount, which has been specifically exempted by the corporation with the previous approval of RBI.
What is the maximum amount of deposit insured under DICGC?
Each of the depositor, who has an account in a bank, is insured up to a maximum of Rs 1 lakh for both principal and interest amount held by them as on the date of cancellation or liquidation of bank’s license or the date on which the scheme of amalgamation/merger/reconstruction takes place. For example, if an individual’s account is having a principal amount of Rs 90000 plus accrued interest of 5000, then the total amount insured by the DICGC would be Rs 95000 because in this case, the insured amount has not gone beyond the limit of Rs 1 lakh. If, however, the principal amount in that account was Rs 1 lakh, the accrued interest of Rs 6000 would not be insured, because that was the amount over the insurance limit.
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When is the DICGC liable to pay the insurance amount?
When a bank goes into liquidation then in such a case the DICGC is liable to pay to each depositor through the liquidator, the amount of his deposit up to Rs 1 lakh within two months from the date of claim list from the liquidator. If a bank is reconstructed or amalgamated or merged with another bank then in such a case the DICGC pays to the bank concerned.
Can the DICGC withdraw the deposit insurance coverage from any of the banks?
If any of the banks fail to pay the premium for three consecutive periods, then the corporation may cancel the registration of an insured bank. A proper notice in such a case will be given to all the depositors through newspaper, media, in the event of the DICGC withdrawing its coverage from any of its banks for defaulting in the payment of premium as mentioned.
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Also, the registration or license of an insured bank stands cancelled if the bank is prohibited from receiving fresh deposits by the RBI; or it is wound up either voluntarily or compulsorily, or it ceases to be a banking company or a co-operative bank within the meaning of Section 36A(2) of the Banking Regulation Act, 1949. In the event of the cancellation of registration of a bank, deposits of the bank remain covered by the insurance till the date of the cancellation.