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What is Deposit Insurance? How deposit insurance is made in India?

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What is Deposit Insurance? How deposit insurance is made in India?
posted Aug 28, 2017 by Ati Kumar

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Protecting the deposits made by people in banks is very important to ensure confidence in the banking system. In Most countries, there are arrangements to protect the money deposited by the depositors. The common form of providing safety to depositors is deposit insurance. Deposit insurance is providing insurance protection to the depositor’s money by receiving a premium.

Deposit Insurance in India

In India, the deposit insurance was started with the launch of the Deposit Insurance Corporation and Credit Guarantee Corporation (DICGC) of India in 1961. DICGC is fully owned by the RBI. Deposit insurance is mandatory for all banks. The premium charged is on a flat rate basis which is 10 paise per Rs 100. The amount of coverage is presently limited to Rs one lakh. A Deposit Insurance Fund (DIF) is built up from the premium received from insured banks and the coupon received from investment in central government securities.

Deposit insurance extended by DICGC covers all commercial banks, including Local Area Banks (LABs) and Regional Rural Banks (RRBs) in all the States and Union Territories (UTs). All Co-operative Banks across the country except three UTs of Lakshadweep, Chandigarh, and Dadra and Nagar Haveli are also covered by deposit insurance. In the event of a bank failure, DICGC protects bank deposits that are payable in India. The DICGC insures all deposits such as savings, fixed, current, recurring, etc.

answer Aug 30, 2017 by Kavana Gowda
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