DICGC is a subsidiary of RBI which provides insurance of deposits and guaranteeing of credit facilities to all commercial banks registered under the guidelines of the RBI Act. It provides deposit insurance that works as a protection cover for bank deposit holders when the bank fails to pay its depositors.
It insures all bank deposits, such as savings, fixed, current and recurring deposit for up to the limit of Rs 5 lakh per bank.
If the total of all the deposits held by an individual in a single bank exceeds Rs 5 lakh, then he will be able to get only Rs 5 lakh inclusive of principal and interest amount if the bank goes bankrupt.
WORKING OF DICGC
DICGC covers depositors of all commercial banks and foreign banks operating in India, state, central and urban co-operative banks, local area banks and regional rural banks provided the bank has bought the cover from DICGC.
The agency’s operations are performed as per The Deposit Insurance and Credit Guarantee Corporation Act, 1961 and The Deposit Insurance and Credit Guarantee Corporation General Regulations, 1961, framed by RBI under the provisions of sub-section (3) of Section 50 of the act. The act states that the establishment of this corporation is with the aim of insuring deposits, guaranteeing credit facilities, and other related matters.
DEPOSITS NOT COVERED BY DICGC
The DICGC does not include 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 bank.
- Any amount due on account of any deposit received outside India.
- Any amount specifically exempted by the DICGC with previous approval of RBI.
PROCEDURE FOR DEPOSITORS TO CLAIM THE MONEY FROM FAILED BANK
The DICGC does not deal directly with depositors.
- The RBI (or the Registrar), on directing that a bank be liquidated, appoints an official liquidator to oversee the winding up process.
- Under the DICGC Act, the liquidator is supposed to hand over a list of all the insured depositors (with their dues) to the DICGC within three months of taking charge.
- The DICGC is supposed to pay these dues within two months of receiving this list.
Thus, in a nutshell DICGC is wholly owned RBI subsidiary which provides deposit insurance for deposit holders in a bank in case the bank fails and does not have money to pay its depositors.