Deposit Insurance Credit Guarantee Corporation Bill 2021

About DICGC Bill 2021

Accessing depositors' money has been an issue of when it will be allowed and under what conditionalities. Normally, it takes about 8-10 years, after the complete liquidation of the bank. Now, what we are saying is even.

As per the proposed process, a bank under moratorium would have to collect all the account details and balances and share it with the Deposit Insurance Credit Guarantee Corporation (DICGC) within 45 days. The DICGC would get another 45 days to check the details and process the claims.
With the deposit insurance increased from ?1 lakh to ?5 lakh, it will cover 98.3% of all deposit accounts and 50.9% of all deposits’ value. Just compare this with what prevails outside — only 80% of deposits are insured, with 20%-30% of deposit value globally.
The premium paid by banks to the DICGC would also be raised.
This happened in the backdrop of the Punjab and Maharashtra Bank Cooperative crisis.

DICGC (Deposit Insurance Credit Guarantee Corporation) and Cooperative Banks

DICGC is an RBI subsidiary. It provides Deposit insurance cover.
Cooperative Banks deposit insurance cover increased from Rs. 1 lakh to Rs. 5 lakh. In 1993, it was increased from 30000 to 1 lakh.
DICGC insures all bank deposits, such as savings, fixed, Current and recurring.
But it does not insure
1. Deposits of foreign/ Central/ State governments and of Central / State Govts,
2. Deposits of State Land development banks with the State Cooperative Banks,
3. Inter bank deposits
4. Deposits received outside India and
5. Those specifically exempted by the Corporation with the prior approval of Banking regulator.
But it doesn’t cover NBFCs and Primary Agriculture Cooperative Societies.
DICGC also charges a flat 0.1% insurance premium on the deposits of banks.

Way Forward

Among BRICS, India has the lowest deposit insurance cover to per capita income ratio, at 0.9 times.
There is a suggestion to increase it to Rs. 15 lakhs or that those who want increased coverage should pay additional premium.
During such freeze in withdrawals atleast the statutory amount should be released.
But DICGC doesn’t cover NBFCs and Primary Agriculture Cooperative Societies.
RBI in 2015 suggested that this premium should be based on differential risk based on lending practices of bank.
SBI says 93% of the premium in 2018-19 was from commercial banks (Public banks 75% and Private Banks 18%).
We can also bring private sector insurers and re-insurers in the deposit insurance segment which could drive down premium prices.

Source: IE

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