The cabinet has approved the Deposit Insurance and Credit Guarantee Corporation Act (DICGC) amendment bill. Under this, in the event of the failure of the bank, the deposited amount of customers up to Rs 5 lakh will be safe. Depositors will get this amount within 90 days. At present, only the amount deposited in the bank of the customers up to one lakh rupees is safe.
Although the government had announced to increase the limit of deposit insurance by 5 times in 2020 itself, but it has now got the approval of the cabinet. It is yet to get the approval of Parliament. Finance Minister Nirmala Sitharaman has said that the bill will be introduced in the monsoon session of Parliament itself.
What is DICGC?
Deposit Insurance and Credit Guarantee Corporation (DICGC) is a Reserve Bank-owned entity that provides insurance cover on bank deposits. This provides a cushion to customers in case of bank failure.
How will you get the money, if the bank fails?
If a bank closes or becomes insolvent, the DICGC first asks the bank for the list of customers and their deposits. After this, DICGC gives the insurance amount to the bank. Then the bank sends the insurance money to their account based on the deposit amount of its customers.
In how many days you will receive your money?
If your bank goes bankrupt or goes into the moratorium due to any reason, then you will get your deposited money in 90 days. The affected bank will have to send the details of the account holders to the DICGC within 45 days. In the next 45 days, DICGC will return the money to the account holders.
What if the deposited amount is greater than Rs 5 lakh?
Suppose a depositor has a deposit of Rs 20 lakh in the bank. In case of bank failure due to any reason, the depositor will get an insurance cover of Rs 5 lakh. Earlier it was only 1 lakh rupees. DICGC does not directly charge any premium on this insurance from the depositor. This premium is paid by banks only. A deposit guarantee is applicable only in case of bank closure.
This 5 lakh cover includes all types of accounts including FD and RD. Moreover, the amount includes Principal as well as interest.
Which banks are covered under this?
Savings, current and deposit accounts of all commercial, co-operative, rural banks and foreign banks operating in India will come under its purview.
While registering any bank, the DICGC gives them a printed leaflet, which contains information about the insurance available to the depositors. If any depositor needs information about this, they can inquire about it from the officer of the bank branch.
Who will pay the premium for this insurance?
The premium for this insurance is paid by the bank. Bank customers have benefited from the increase in insurance cover, but the premium charged per 100 rupees has increased from 10 paise to 12 paise.
Why this change was much needed?
Recently, customers of Punjab and Maharashtra Co-operative Bank (PMC), Yes Bank and Lakshmi Vilas Bank (LVB) had to face problems due to cash crunch in banks. However, these banks were neither closed nor bankrupt. But the crisis at these banks had raised concerns in the minds of customers about their deposits.
On increasing the guarantee amount, people will not be worried about depositing money in banks equal to the guarantee amount, due to which people’s trust in the banking system will also increase. Which ultimately increase the lending capacity of banks.
Also read: Banking Failures in India