Explained:What is deposit insurance?

News:Recently,the failure of the Punjab and Maharashtra Co-operative(PMC) Bank has reignited the debate on the low level of insurance against the deposits held by customers in Indian banks.


What is the insurance cover provided currently?

  • Currently,in case of a bank collapse,a depositor can claim an amount up to a maximum of ₹ 1 lakh per account as the insurance cover(even if the deposit in their account is greater than ₹1 lakh). 
  • This amount is termed ‘deposit insurance’- the insurance cover against the deposits of an individual in banks.
  • The insurance cover is provided by the Deposit Insurance and Credit Guarantee Corporation(DICGC).
  • DICGC had last revised the deposit insurance cover to ₹ 1 lakh in 1993, raising it from ₹ 30,000 since 1980.But the protection cover of deposits in Indian banks through insurance is still among the lowest in the world.

About DICGC:

  • Deposit Insurance and Credit Guarantee Corporation (DICGC) is a subsidiary of the Reserve Bank of India(RBI).
  • It was established in 1978 as a statutory body under Deposit Insurance and Credit Guarantee Corporation Act,1961.
  • The act provides for the establishment of a Corporation for the purpose of insurance of deposits and guaranteeing of credit facilities and for other matters connected therewith or incidental thereto.
  • The Deputy Governor of RBI acts as its Chairman of DICGC.It is headquartered in Mumbai.

Which banks are insured by DICGC:

  • DICGC provides insurance covers for all commercial banks, local area banks, regional rural banks and co-operative banks and branches of foreign banks in India.
  • However,the Primary cooperative societies, Non-banking financial companies(NBFCs) and mutual funds are not insured by the DICGC.

Types of Deposits Covered:DICGC insures all bank deposits such as savings, 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 and deposit received outside India
  • Any amount which has been specifically exempted by the corporation with the previous approval of the RBI.