In response to a significant fraud that occurred at Punjab and Maharashtra Co-operative Bank, specific actions were taken that also had implications for other banks. The repercussions of the fraud spread to Lakshmi Vilas Bank and Yes Bank, putting them under pressure and necessitating their restructuring.
To address client concerns and protect their interests in the event of a bank failure, the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act was amended. The DICGC was established in 1978, following Parliament’s adoption of the Deposit Insurance and Credit Guarantee Corporation Act of 1961. The Deposit Insurance Corporation (DIC) and the Credit Guarantee Corporation of India Ltd. (CGCI) were merged under this statute. Deposit insurance coverage offered by the DICGC is required for all types of banks operating in India, including local banks, cooperative banks, regional rural banks, and international banks. Such changes were authorised by the Cabinet, signifying government support.
Such modifications served as a proactive step taken by the government to strengthen the banking sector and enhance customer confidence by providing increased deposit insurance coverage and a more expedited process for retrieving funds in case of bank failures or suspensions.
Why is DICGC in the News?
The Deposit Insurance and Credit Guarantee Corporation (DICGC) has requested all banks to display its logo and QR code prominently on their websites and Internet banking portals. This initiative aims to raise awareness about the deposit insurance scheme among customers. According to the plan, deposits up to Rs 5 lakh in banks are insured by the DICGC. This coverage extends to various types of banks, including commercial banks, local area banks (LABs), payments banks (PBs), small finance banks (SFBs), regional rural banks (RRBs), and cooperative banks.
The Reserve Bank’s subsidiary stressed the importance of deposit insurance in defending the interests of small depositors, building trust in the banking system, and ensuring financial stability in a circular. In consultation with the RBI, it was decided that all banks registered with DICGC (Deposit Insurance and Credit Guarantee Corporation) would be required to prominently display the DICGC insignia as well as a QR code linked to the DICGC website on their own websites and Internet banking portals.
The purpose of displaying the logo and QR code is to enhance awareness about deposit insurance in a focused and continuous manner. This measure will make it easier for customers to identify banks that are covered by the deposit insurance scheme provided by DICGC. Additionally, it will facilitate quick access to information regarding deposit insurance.
To ensure compliance with these rules, all insured banks have been ordered to display the DICGC logo and QR code beginning September 1, 2024. This will help to promote openness and provide customers with easy access to important deposit insurance information.
Statistical Analysis
As of March 31, 2024, there were 2,027 registered insured banks in India. Out of these, 140 were commercial banks, 43 were regional rural banks (RRBs), two were local area banks (LABs), six were payments banks (PBs), 12 were small finance banks (SFBs), and 1,887 were co-operative banks.
The current ceiling for deposit insurance in India, according to the Reserve Bank of India (RBI), is Rs 5 lakh per depositor of a bank. As of March 31, 2024, there were 294.5 crore completely protected accounts under this plan, accounting for 98.1% of the total number of reports (300.1 crore).
In terms of the amount, the total insured deposits were Rs 83,89,470 crore, which accounted for 46.3% of the assessable deposits totalling Rs 1,81,14,550 crore. The insurance cover provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC) is 2.91 times the per capita income in 2022-23.
The DICGC authorised supplemental claims of Rs 105.8 crore for 11 liquidated banks during the fiscal year 2022-23. Furthermore, the RBI’s ‘All-Inclusive Directions (AIDs)’ were used to satisfy claims totalling Rs 646.8 crore for 28 banks.
The Deposit Insurance Fund (DIF) had a total value of Rs 1,69,263 crore as of March 31, 2024. The DIF acts as a reserve fund for depositor claims in the case of bank failures or insolvencies.
