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Bank deposit insurance programme:

GS Paper 3:

Topics Covered: Government policies and interventions for development in various sectors and issues arising out of their design and implementation.



The Central government has highlighted the significance of increase in bank deposit insurance cover, in case of problems occurring such as closure, from Rs 1 lakh to Rs 5 lakh. PM Modi is to address the nation on Bank Deposit Insurance.



Earlier, there used to be a bank deposit insurance cover of Rs 1 lakh for the deposit of the same amount or more under the ‘Deposit Insurance Credit Guarantee Scheme’.


What is deposit insurance? How is it regulated in India?

  • Deposit insurance is providing insurance protection to the depositor’s money by receiving a premium.
  • The government has set up Deposit Insurance and Credit Guarantee Corporation (DICGC) under RBI to protect depositors if a bank fails.
  • DICGC charges 10 paise per ₹100 of deposits held by a bank. The premium paid by the insured banks to the Corporation is paid by the banks and is not to be passed on to depositors.
  • DICGC last revised the deposit insurance cover to ₹5 lakh in Feb, 2020, raising it from ₹ 1 lakh since 1993.


Deposit Insurance- Coverage:

  • 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.


What is the procedure for depositors to claim the money from a 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.


The DICGC does not include the following types of deposits:

  1. Deposits of foreign governments.
  2. Deposits of central/state governments.
  3. Inter-bank deposits.
  4. Deposits of the state land development banks with the state co-operative bank.
  5. Any amount due on account of any deposit received outside India.
  6. Any amount specifically exempted by the DICGC with previous approval of RBI.



Prelims Link:

  1. What is deposit insurance? What is the present limit? Who is not covered?
  2. What is DICGC?
  3. RRBs vs Urban cooperative banks.
  4. BASEL norms- important targets.
  5. Where is Basel?
  6. CRAR vs Leverage ratio.
  7. What is priority sector lending?

Mains Link:

Write a note deposit insurance scheme and discuss its significance.

Sources: the Hindu.