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Deposit Insurance And Credit Guarantee Corporation (DICGC) Bill, 2021

Deposit Insurance And Credit Guarantee Corporation (DICGC) Bill, 2021:

The Prime Minister said that Rs 1,300 crore had been paid to over 1 lakh depositors who could not access their money as their banks faced financial crises.

  • The deposits worth Rs 76 lakh crore were insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act providing full coverage to around 98% of bank accounts.
  • Earlier, the Union Cabinet cleared the Deposit Insurance and Credit Guarantee Corporation (DICGC) Bill, 2021.
  • Deposit Insurance: It is a protection cover against losses accruing to bank deposits if a bank fails financially and has no money to pay its depositors and has to go in for liquidation.
  • Credit Guarantee: It is the guarantee that often provides for a specific remedy to the creditor if his debtor does not return his debt.
  • Limit for Deposit Insurance:
    • Currently, a depositor has a claim to a maximum of Rs 5 lakh per account as insurance cover. This amount is termed ‘deposit insurance’
    • The cover of Rs 5 lakh per depositor is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC).
    • Depositors having more than Rs 5 lakh in their account have no legal recourse to recover funds in case a bank collapses.
    • Premium for the insurance has been raised from 10 paise for every Rs 100 deposit, to 12 paise and a limit of 15 paise has been imposed.
    • The premium for this insurance is paid by banks to the DICGC, and not be passed on to depositors.
    • The Insured banks pay advance insurance premiums to the corporation semi-annually within two months from the beginning of each financial half year, based on their deposits as at the end of previous half year.
  • Coverage:
    • 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.
  • Types of Deposits Covered:
    • DICGC insures all bank deposits, such as saving, fixed, current, recurring, etc. except the following types of deposits:
    • Deposits of foreign Governments.
    • Deposits of Central/State Governments.
    • Inter-bank deposits.
    • Deposits of the State Land Development Banks with the State co-operative banks.
    • Any amount due on account of any deposit received outside India.
    • Any amount which has been specifically exempted by the corporation with the previous approval of the RBI.