Deposit Insurance and Credit Guarantee Corporation
Economic Development > Indian Economy and Issues > Organisations
About Deposit Insurance and Credit Guarantee Corporation
- Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly owned subsidiary of Reserve Bank of India.
- DICGC insures all bank deposits, such as saving, fixed, current, recurring deposit for up to the limit of Rs. 500,000 of each deposits in a bank.
- DICGC came into existence in 1978 after the merger of Deposit Insurance Corporation (DIC) and Credit Guarantee Corporation of India Ltd. (CGCI) after passing of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 by the Parliament.
- It serves as a deposit insurance and credit guarantee for banks in India.
- DICGC charges 10 paise per ? 100 of deposits held by a bank. The premium paid by the insured banks to the Corporation is paid by the banks and is not to be passed on to depositors.
- The Damodaran Committee on ‘Customer Services in Banks’ (2011) had recommended a five-time increase in the cap to ?5 lakh due to rising income levels and increasing size of individual bank deposits.
- Banks, including regional rural banks, local area banks, foreign banks with branches in India, and cooperative banks, are mandated to take deposit insurance cover with the DICGC.
- A maximum of ?5,00,000 (after the budget of 2020-21) is insured for each user for both principal and interest amount. If the customer has accounts in different banks, all of those accounts are insured to a maximum of ?5,00,000 each.
- However, if there are more accounts in same bank, all of those are treated as a single account. The insurance premium is paid by the insured banks itself. This means that the benefit of deposit insurance protection is made available to the depositors or customers of banks free of cost.
- The Corporation has the power to cancel the registration of an insured bank if it fails to pay the premium for three consecutive half-year periods. The Corporation may restore the registration of the bank if the bank makes a request and pays all the amounts due by way of premium from the date of default together with interest.
Q.Consider the following statements regarding Deposit Insurance and Credit Guarantee Corporation (DICGC):
1.Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly owned subsidiary of Reserve Bank of India.
2.A maximum of ?5,00,000 (after the budget of 2020-21) is insured for each user for both principal and interest amount.
Which of the statements given above is/are correct?
c)Both 1 and 2
d)Neither 1 nor 2
Answer to the Prelims Question