Source: LM
Context: The Finance Ministry is considering increasing the deposit insurance limit, which currently stands at ₹5 lakh under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961.
About Deposit Insurance and Credit Guarantee Corporation (DICGC):
- What it is?
- DICGC is a subsidiary of the Reserve Bank of India (RBI) that provides deposit insurance to bank depositors, ensuring the safety of their money in case of bank failures.
- History:
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- First considered in 1948 after banking crises in Bengal and revisited in 1960 after the collapse of Palai Central Bank & Laxmi Bank.
- The Deposit Insurance Corporation Act, 1961, came into force on January 1, 1962.
- Merged with the Credit Guarantee Corporation in 1978 to form DICGC under the Ministry of Finance.
- Ministry: Operates under the Department of Financial Services, Ministry of Finance.
- Aim: To protect depositors’ funds and maintain public confidence in the banking system.
- Functions:
- Insures deposits of banks against failure.
- Provides credit guarantees to priority sector lending institutions.
- Monitors bank financial health and steps in when required.
- Features of Deposit Insurance:
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- Existing Limit: Each depositor insured up to ₹5 lakh (including principal and interest) per bank, per depositor.
- Coverage: Includes commercial banks, regional rural banks, foreign banks operating in India, and cooperative banks.
- What is Covered?
- Savings accounts, fixed deposits, current accounts, and recurring deposits.
- What is NOT Covered?
- Deposits of foreign governments, central/state governments, and inter-bank deposits.
- Deposits with State Land Development Banks.
- Deposits outside India and exempted by RBI approval.
- Multiple Branches in Same Bank?
- Deposits across different branches of the same bank are clubbed under one insurance cover.
