Bank deposit insurance cover upped from Rs 1 lakh to Rs 5 lakh
- Union Minister of Commerce and Industry said that the Central government has increased the bank deposit insurance cover, in case of problems occurring such as closure, from Rs 1 lakh to Rs 5 lakh.
- The amount has to be refunded to the depositor within 90 days.
- Deposit insurance covers all deposits such as savings, fixed, current, recurring deposits, etc. in all commercial banks, functioning in India.
- Deposits in State, Central and Primary cooperative banks, functioning in States/Union Territories are also covered.
- Deposit Insurance and Credit Guarantee Corporation (DICGC) pays the depositors/account holders of the 21 insured banks placed under the all-inclusive directions (AID) an amount equivalent to the deposits outstanding or up to a maximum of ₹5 lakh in 90 days.
- Earlier, account holders had to wait for years till the liquidation or restructuring of a distressed lender to get their deposits that are insured against default.
- Last year, the government raised the insurance amount to Rs 5 lakh from Rs 1 lakh.
- Prior to that, the DICGC had revised the deposit insurance cover to Rs 1 lakh on May 1, 1993 — raising it from Rs 30,000, which had been the cover from 1980 onward.
- Depositors having more than Rs 5 lakh in their account have no legal recourse to recover funds in case a bank collapses.
- The first tranche of interim payments has been released by the Deposit Insurance and Credit Guarantee Corporation recently, against claims received from depositors of 16 Urban Cooperative Banks which are under restrictions by RBI.
Deposit Insurance and Credit Guarantee Corporation (DICGC)
- DICGC is a wholly-owned subsidiary of the Reserve Bank of India (RBI).
- It provides deposit insurance that works as a protection cover for bank deposit holders when the bank fails to pay its depositors.
- 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.