Suppose I ask you for some money. Will you lend it instantly to me without thinking of anything? Maybe you will, just if I have a good credit score in your mind as per my previous borrowings from you. You will definitely lend some money to me if you are sure that I will return it back to you when required. We generally put our hard-earned money where our money is insured to come back to us and at the same time gives some returns. But what if we deposit our money into the bank account & the bank goes bankrupt? Who will return our money? The only answer is DICGC i.e. Deposit Insurance Credit Guarantee Corporation Of India.

DICGC is a wholly owned subsidiary of the Reserve Bank of India which insure our money which is deposited with the banks. It is a high probability that you have listened about DICGC before. So, let’s learn about the Structure and Functioning of the DICGC.

How DICGC was started?

The concept of insuring deposits kept with banks received attention for the first time in the year 1948 after the banking crises in Bengal. The question came up for reconsideration in the year 1949, but it was decided to hold it in abeyance till the Reserve Bank of India ensured adequate arrangements for inspection of banks. Subsequently, in the year 1950, the Rural Banking Enquiry Committee also supported the concept. Serious thought to the concept was, however, given by the Reserve Bank of India and the Central Government after the crash of the Palai Central Bank Ltd. and the Laxmi Bank Ltd. in 1960. The Deposit Insurance Corporation (DIC) Bill was introduced in the Parliament in August 1961. Subsequently, the Bill got the assent of the President and the Deposit Insurance Act, 1961 came into the force.

The Deposit Insurance Scheme was initially extended to functioning commercial banks only. This included the State Bank of India and its subsidiaries, other commercial banks and the branches of the foreign banks operating in India.

Is the Deposit in Co-operative Banks is also insured under DICGC Act?

Since 1968, with the enactment of the Deposit Insurance Corporation (Amendment) Act, 1968, the DICGC  was required to register the ‘eligible co-operative banks’ as insured banks under the provisions of Section 13 A of the Act.

An eligible co-operative bank means a co-operative bank (whether it is a State co-operative bank, a Central co-operative bank or a Primary co-operative bank) in a State which has passed the enabling legislation amending its Co-operative Societies Act, requiring the State Government to vest power in the Reserve Bank to order the Registrar of Co-operative Societies of a State to wind up a co-operative bank or to supersede its Committee of Management and to require the Registrar not to take any action for winding up, amalgamation or reconstruction of a co-operative bank without prior sanction in writing from the Reserve Bank of India.

Board of Directors of DICGC

Currently, B.P. Kanungo (Deputy Governor of RBI) is the chairman of the Deposit Insurance and Credit Guarantee Corporation. Other than him there are three directors, one is nominated by the Reserve Bank of India and the other two are nominated by the central government. These are as shown below:Board of Director at DICGC

What is the maximum deposit amount insured by the DICGC?

Each depositor in a bank is insured up to a maximum of one lakh rupees for both principal and interest amount held by him as on the date of liquidation or cancellation of bank’s licence or the date on which the scheme of amalgamation or merger or reconstruction comes into force. The deposits kept by a person in different branches of a bank are aggregated for the purpose of insurance cover and a maximum amount up to rupee only one lakh is paid to the depositor.

Are deposits in different banks separately insured?

Yes. If you have deposited your money with more than one bank, deposit insurance coverage limit is applied separately to the deposits in each bank. The premium for deposit insurance is borne completely by the insured bank.

Does the DICGC directly pay to depositors?

The answer is NO. In the event of a bank’s liquidation, the liquidator prepares depositor wise claim list and sends it to the DICGC for scrutiny and payment. The DICGC pays the money to the liquidator who is liable to pay to the depositors. In the case of amalgamation or merger of banks, the amount due to each depositor is paid to the transferee bank (the bank with which your bank is getting merged).

What does the DICGC insure?

The DICGC insures all deposits such as savings deposits, fixed deposits, current deposits, recurring deposits etc. While the following types of deposits are not insured by DICGC:

  • Deposits of foreign Governments.
  • Deposits of Central and State Governments.
  • Inter-bank deposits.
  • Deposits of the State Land Development Banks with the State co-operative banks.
  • Any amount due on account of any deposit received outside India.
  • Any amount, which has been specifically exempted by the DICGC with the previous approval of Reserve Bank of India.


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