Understanding DICGC: Safeguarding Deposits in Indian Banks

In the intricate world of banking, understanding the mechanisms that secure your hard-earned money is paramount. The Deposit Insurance and Credit Guarantee Corporation (DICGC) plays a pivotal role in ensuring the safety of deposits in various banks across India. Let’s delve into the key aspects of DICGC to comprehend its functions and the protection it offers to depositors.

1. Banks Covered by DICGC: Commercial and Cooperative Banks

DICGC extends its protective umbrella to a diverse range of banks:

Commercial Banks: All commercial banks, including branches of foreign banks operating in India, local area banks, and regional rural banks fall under DICGC coverage.
Cooperative Banks: State, Central, and Primary cooperative banks, commonly known as urban cooperative banks, in States or Union Territories with amended local Cooperative Societies Acts empowering the RBI are covered. As of now, all cooperative banks enjoy the protection provided by DICGC. It’s important to note that primary cooperative societies are not insured by DICGC.

2. Types of Deposits Insured by DICGC

DICGC insures various types of deposits, such as savings, fixed, current, and recurring deposits. However, certain types of deposits are exempted from coverage, including deposits of foreign governments, Central/State governments, inter-bank deposits, and deposits received outside India.

3. Maximum Deposit Amount Insured

Each depositor in a bank is insured up to a maximum of Rs. 5,00,000 (Rupees Five Lakhs) for both principal and interest amounts combined. This coverage is applicable on the date of the bank’s liquidation, license cancellation, or the effective date of amalgamation/merger/reconstruction.

4. Identifying DICGC Coverage for Your Bank

DICGC provides printed leaflets to registered banks, offering information on the protection afforded to depositors. In case of any doubts, depositors are encouraged to make specific inquiries with bank officials.

5. Aggregation of Deposits for Insurance Cover

Deposits held in different branches of a bank are aggregated for insurance coverage, with a maximum of Rs. 5,00,000 applicable. However, deposits in different banks are separately insured.

6. Treatment of Principal and Accrued Interest

DICGC insures both principal and interest, up to the maximum coverage limit. It’s important to note that if the principal amount is already at the coverage limit, accrued interest beyond that limit is not insured.

7. Joint Accounts and Different Capacities

Deposits in joint accounts are considered in the same capacity and same right unless the order of names varies. DICGC ensures separate coverage for deposits held in different capacities or with different rights.

8. Withdrawal from DICGC Coverage

No insured bank can withdraw from the compulsory deposit insurance scheme. The coverage is mandatory for all banks.

9. DICGC Liability and De-Registration of Banks

DICGC’s liability arises during the liquidation of de-registered “Insured banks.” However, the liability is limited to the extent of deposits as of the date of cancellation of registration.

In conclusion, DICGC serves as a crucial guardian of depositors’ interests, providing a safety net in the dynamic landscape of banking. Understanding these key facets empowers depositors with the knowledge needed to make informed decisions about their financial well-being.