Protection for Bank Depositors

Bank deposits up to Rs.100000.00 (Rupees One Lakh Only) in respect of each depositor are fully protected by the Deposit Insurance and Credit Guarantee Corporation under the Deposit Insurance Scheme. The Scheme covers all commercial banks (including Regional Rural Banks) operating in India and also co-operative banks in States and Union Territories to which the Scheme has been extended by the Central Government. These Banks are registered as insured banks with the Corporation.

The Corporation’s liability in respect of insured deposits will arise in the following cases:

·                    If a Bank goes into liquidation: The Corporation will arrange to pay to every depositor directly or through the liquidator the amount due to him under the insurance scheme.

·                    If a bank is reconstructed or amalgamated  with another bank and the scheme the scheme of reconstruction or amalgamation does not entitle a depositor to get credit for the full amount of his deposit: The Corporation will arrange to pay the reconstructed bank or the amalgamated bank an amount equivalent to the shortfall between the amount due to the depositor under the insurance scheme and the amount of deposit of credit received by him under the scheme of reconstruction or amalgamation

DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION

DEPOSIT INSURANCE DEPARTMENT

NEW INDIA CENTRE, 17, COOPERAGE ROAD,

POST BOX NO. 1076, MUMBAI – 400 039.

DICGC/DID/05.03.01.07/144/93/94                                                   31ST MAY, 1993

To,

The Chief Executive Officers,

Of all insured banks

Dear Sir,

Deposit Insurance and Credit Guarantee Corporation Act 1961 – Increase in the limit of Deposit Insurance Cover and rate of premium

1.                  We reproduce on the reverse, for your information, a copy of the press communiqué issued by  the Deposit Insurance and Credit Guarantee Corporation regarding enhancement of the limit of insurance cover in respect of amounts due to a depositor of an insured bank from Rs. 30,000/- to Rs. 1,00,000/- with effect from 1st May 1993.; Thus in terms of Section 16 of Deposit Insurance and Credit Guarantee Corporation Act, 1961, the limit of the total amount payable by the Corporation to any one depositor in respect of his/her deposits with an insured bank in the same right and capacity shall be Rupees One Lakh from the said date.

2.                  It may be noted that where the Corporation has already incurred liability before 1st May 1993, the limit of insurance covers of Rs. 30000/- as in force up to that date continues to be applicable.

3.                  The rate of premium payable by the insured banks has also been marginally raised from 4 paise to 5 paise per Hundred Rupees per annum. A circular in this regard is being issued separately.

4.                  In case your bank has in stock any publicity leaflets obtained from us, you may make necessary alterations before displaying the same to the public.

5.                  In view of the enhanced insurance cover the annual return in Form DI-02 required to be compiled by your bank as on the last working day of June will have to be submitted to us in the revised proforma enclosed.

6.                  Please acknowledge receipt.

Yours faithfully,

 

(S.K. KAPUR)

General Manager

Encl: One

 

PRESS COMMUNIQUE

April 30, 1993

Limit of Insurance Coverage for Bank

Deposits raised from Rs. 30000/- to Rs. 100000/-

With a view of providing a greater measure of protection to bank’s depositors, the Deposit Insurance and Credit Guarantee Corporation has raised the limit of Insurance cover for the deposits in an Insured bank from Rs. 30000/- to Rs. 100000/- with effect from 1 May 1993. The present limit of Rs. 30,000/- per depositor was fixed in July 1980 when it was raised from the previous level of Rs. 20,000/-

The enhancement insurance cover will apply in the case of any liquidation or winding up of an insured bank on or after 1 May 1993 and compromise or arrangement of reconstruction or amalgamation of any insured bank sanctioned on or after the date not providing for payment of amounts due to its depositors. Where, however, the Corporation has already incurred any liability before 1 May, 1993, the existing limit of Rs. 30000/- of insurance cover will continue to be applicable.

The premium payable by the insured bank on their assessable deposits has also been marginally raised from four paise at present to five paise per Rs. 100/- per annum with effect from 1 July 1993.

FAQs

DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION (DICGC)

DICGC is a wholly owned subsidiary of the Reserve Bank of India, Since 1962, it is engaged in providing deposit insurance for depositors of banks against loss of part or all of their deposits arising from bank failures. Deposit Insurance is compulsory as well as automatic for the bank and thus no bank can remain uninsured by the DICGC except those cooperative banks where the concerned State Governments are yet to pass the required legislation. The purpose of this brochure is to explain the deposit insurance coverage that DICGC provides.

1.      Which banks are insured by DICGC?

Commercial Banks

All commercial banks, including branches of foreign banks functioning in India, local area banks and regional rural banks are insured by DICGC.

Co-operative Banks

All State, Central and primary cooperative banks, also called urban cooperative banks, functioning in States which have amended the local Co-operative Societies Act empowering the Reserve Bank to order the Registrar of Cooperative Societies of the State to liquidate, amalgamate or reconstruct a cooperative bank and to supersede its committee of management, are insured by DICGC. At present all States other than the State of Arunachal Pradesh, Meghalaya, Mizoram, Nagaland, and the Union Territories of Chandigarh and Lakshadweep are covered by DICGC.

Primary cooperative societies are not insured by DICGC.

2.      What does DICGC insure?

DICGC insures all deposits such as savings, fixed, current, recurring, etc. deposits except the following types of deposits

(i)         Deposits of foreign Governments

(ii)        Deposits of State / Central Governments

(iii)       Inter-bank deposits

(iv)      Certificates of deposit

(v)       Deposits of the stat land development banks with the stat cooperative banks

(vi)      Deposits taken as cash collaterals

(vii)      Deposits which are created by transferring subordinated liabilities, at least 6 months prior to a bank failure or moratorium, whichever is earlier and

(viii)     Deposits held abroad.

3.      What is the maximum deposit amount insured by DICGC?

Each depositor in a bank is insured up to a maximum of Rs.1,00,000 (Rupees   One Lakh ) for both principal and interest amount held by him in the same right and capacity as on the date of liquidation/cancellation of bank’s licence.

4.      How will you know whether your bank is insured by DICGC or not?

DICGC while registering the banks as insured banks advises them to display prominently at their branches that the depositors’ money up to Rupees on lakh is insured by DICGC. Besides, the banks are also required to indicate in the account opening forms the extent of insurance cover available to the depositor.  In case of doubt, depositor should make specific enquiry from the branch official in this regard.

5.      What is the ceiling on amount of insured deposits kept by one person in different branches of a bank?

The deposits kept in different branches of a bank are aggregated for the purpose of insurance cover and a maximum amount up to Rupees on lakh is paid.

6.      Does DICGC insure just the principal on an account or both principal and    accrued interest?

DICGC insures principal and interest up to a maximum amount of Rs. One lakh.  For example, if an individual had an account with a principal amount of Rs.95000 plus accrued interest of Rs.4000 the total amount insured by the DICGC would be Rs.99000.  If, however, the principal amount in that account was Rs. One lakh, the accrued interest would not be insured, not because it was interest but because that was the amount over the insurance limit.

7.      Can deposit insurance be increased by depositing funds into several different accounts all at the same bank?

No. All funds held in the same type of ownership at the same bank are added together before deposit insurance is determined. If the funds are in different types of ownership, or are deposited into separate banks they would be separately insured.

8.      Are deposits in different banks separately insured?

Yes. If you have deposits with more than one bank, deposit insurance coverage limit is applied separately to the deposits in each bank.

9.      If I have my funds on deposit at two different banks, and those two banks are closed on the same day, are my funds added together, or insured separately?

Your funds from each bank would be insured separately, regardless of the date of closure.

10.  What is the meaning of deposits held in the same right and capacity and different right and capacity?

If a person opens in his name more than one account in a bank, for example Mr. Sinha opens one savings account and one or more fixed deposit accounts, all the accounts are considered in the same right and capacity and insurance coverage is limited to a maximum of Rupees one lakh. But if Mr. Sinha opens a joint account, the joint account is considered in different right and capacity and insurance coverage is provided separately from any deposits individually owned by the joint depositors. Each joint account owned by a combination of different persons is insured up to Rupees One Lakh.

Illustrations

Deposits held in different capacities

Account Names

Savings A/c

Current A/c

FD A/c

Total Deposits

Deposits Insured

Shri S K Pandit (Individual)

17,200.00

22,000.00

80,000.00

119,200.00

100,000.00

Shri S K Pandit (Partner of ABC & Co)

 

75,000.00

50,000.00

125,000.00

100,000.00

Shri S K Pandit (Guardian for Master Ajit)

7,800.00

 

80,000.00

87,800.00

87,800.00

Shri S K Pandit (Director, J K Udyog Ltd)

 

230,000.00

45,000.00

275,000.00

100,000.00

 

Deposits held in joint accounts

Account

(i)

First a/c holder - "A" Second a/c holder - "B"

Maximum Insured amount up to Rs. 1 Lakh

Account

(ii)

First a/c holder - "A" Second a/c holder - "C"

Maximum Insured amount up to Rs. 1 Lakh

Account

(iii)

First a/c holder - "B" Second a/c holder - "A"

The a/c will be clubbed with the a/c at (i)

Account

(iv)

First a/c holder - "A" Second a/c holder - "B" Third a/c holder - "C"

Maximum Insured amount up to Rs. 1 Lakh

Account

(v)

First a/c holder - "B" Second a/c holder - "C" Third a/c holder - "A"

The a/c will be clubbed with the a/c at (iv)

 

11.  Can the bank deduct the amount of dues payable by the depositor?

Yes. Banks have right to set off their dues from the amount of deposits. The deposit insurance is available after netting of such dues.

12.  Who pays the cost of deposit insurance?

            Deposit insurance premium is borne by the insured banks.

13.  When is DICGC liable to pay?

            If a bank goes into liquidation:

DICGC is liable to pay to each depositor through the liquidator, the amount of his deposit up to Rupees One Lakh within two months from the date of receipt of claim list from the liquidator.

            If a bank is reconstructed or amalgamated/merged with another bank:

DICGC pays the bank concerned, the difference between the amount due to depositor under the insurance scheme and the amount received by him under the reconstruction/amalgamation scheme within two months from the date of receipt of claim list from the transferee bank/Chief Executive Officer of the insured bank as the case may be.

14.  Does the DICGC directly deal with the depositors of failed banks?

No. In the event of a bank’s liquidation, the liquidator prepares depositor wise claim list and sends it to the DICGC for the scrutiny and payment. DICGC pays the money to liquidator who is liable to pay to the depositors. In the case of amalgamation/merger of banks, the amount due to each depositor is paid to the transferee bank.

15.  Can any insured bank withdraw from the DICGC coverage?

No. The deposit insurance scheme is compulsory and no bank can withdraw from it.

16.  Can DICGC withdraw deposit insurance coverage from any bank?

Deposit Insurance coverage of a bank may be withdrawn if it has been prohibited from receiving fresh deposits; or its license has been cancelled by the Reserve Bank; or it has been ordered to be would up; or it has transferred all deposit liabilities in India to any other institution; or it ceases to be a banking company/eligible co-operative bank; or a liquidator has been appointed in pursuance of a resolution for voluntary winding up of its affairs; or a scheme of compromise or arrangement or reconstruction has been sanctioned by any competent authority and the said scheme does not permit acceptance of fresh deposit; or it has been amalgamated with any other bank/co-operative society.

The Corporation may cancel the registration of an insured bank if it fails to pay the premium for three consecutive periods. In the event of DICGC withdrawing its coverage from any bank for default in the payment of premium the public will be notified through newspapers.

The depositors will continue to have the benefit of Deposits Insurance on the amount of deposit held by them as on the date of withdrawal of coverage.

End of the document……