The depositors of all Banks including branches of foreign banks functioning in India, local area banks and regional rural banks, and all State, Central, and Primary cooperative banks,(also called urban cooperative banks) are protected under the deposit insurance scheme of DICGC. The DICGC insures principal and interest up to a maximum amount of five lakhs. The benefit of deposit insurance is available to all the customers of banks free of cost.
Coverage based on depositors’ same capacity or different capacity and rights:
The deposit insurance cover of ₹5 lakhs is applicable uniformly to all insured banks and their depositors and is payable to any depositor in respect of deposits held by him/ her in the same right and same capacity at all the branches of an insured bank taken together, in case of liquidation/ failure of a bank. All funds held in the same type of ownership at the same bank are added together before deposit insurance is determined. If the funds are in different types of ownership or are deposited into separate banks they would then be separately insured.
The same capacity means that if you have one or more savings/current accounts and one or more fixed/recurring deposit accounts etc., all these are considered as accounts held in the same capacity and in the same right. If an individual opens more than one deposit account in one or more branches of the same bank, the aggregate deposits of all the branches of the same bank are considered accounts held in the same capacity. Further, the deposits held in the name of the proprietary concern where a depositor is a sole proprietor and the amount of Deposit held in his individual capacity are aggregated and insurance cover is available up to rupees five lakhs in maximum. All funds held in the same type of ownership at the same bank are added together before deposit insurance is determined. If the funds are in different types of ownership or are deposited into separate banks they would then be separately insured. In the other words, if you have deposits with more than one bank, the deposit insurance coverage limit is applied separately to the deposits in each bank.
Deposits held in joint accounts :
If more than one deposit account (Savings, Current, Recurring, or Fixed deposit) are jointly held by individuals in one or more branch of a bank say three individuals A, B & C hold more than one joint deposit accounts in which their names appear in the same order then all these accounts are considered as held in the same capacity and in the same right. Accordingly, balances held in all these accounts will be aggregated for the purpose of determining the insured amount within the limit of 5 lakhs.
Account held in different capacities and different rights:
If an individual opens deposit accounts in his capacity as a partner of a firm or guardian of a minor or director of a company or trustee of a trust or a joint account, say with his wife in one or more branches of the bank then such accounts are considered as held in a different capacity and different right. Accordingly, such deposit accounts will also enjoy insurance cover up to rupees five lakhs separately.
Further, if individuals open more than one joint accounts in which their names are not in the same order for example, Account No.1 in the name of A, B, and C; Account No.2 in the name of, B, and A; Account No.3 in the name of C, A, and B; Account No.4 in the name of, C, and B; or group of persons are different say A, B and C and A, B, and D, etc. then, the deposits held in these joint accounts are considered as held in the different capacity and different right. Accordingly, insurance cover will be available separately up to rupees five lakhs to every such joint account where the names appearing in different order or names are different.
In case the depositor has a loan account in the same Bank then that Bank has the right to set off their dues from the number of deposits as of the cut-off date. The deposit insurance is available after the netting of such dues.
DICGC is settling claims from its Deposit Insurance Fund (DIF), a corpus created out of the insurance premium collected from the banks. In the event of a bank fails or goes into liquidation or reconstructed or amalgamated or merged with another bank, DICGC is liable to pay to each depositor through the liquidator, the amount of his deposit up to Rupees Five lakh within two months from the date of receipt of claim list from the liquidator.
The premium payable by banks:
The premium payable by banks to DICGC is calculated by simply applying the current premium rate per 100 deposits per half-year to the assessable deposits. The Deposit Insurance and Credit Guarantee Corporation (DICGC) can usher in a differential premium system (DPS) for banks, based on their risk profile, following an amendment to the DICGC Act. A sub-section inserted in the Act allows the corporation to increase the deposit insurance premium for a bank. Currently, it charges a flat rate premium of 12 paise per ₹100 deposit per annum. According to the amendment, “the Corporation may, having regard to its financial position and to the interests of the banking system of the country as a whole, and with the previous approval of the Reserve Bank of India (RBI), from time to time, raise the aforesaid limit of fifteen paisa per annum for every hundred rupees of the total amount of the deposits in that bank.”
The scheme provides automatic cover for customers’ deposits in commercial banks and cooperative banks, in case the insured bank fails. In the event of liquidation, reconstitution, or amalgamation of an insured bank, every depositor of that bank is entitled to claim the deposit made by them in that bank.
The Corporation may cancel the registration of an insured bank if it fails to pay the premium for three consecutive periods. In the event of the DICGC withdrawing its coverage from any bank for default in the payment of premiums, the public will be notified through newspapers. Registration of an insured bank stands cancelled if the bank is prohibited from receiving fresh deposits, or its licence is cancelled or a licence is refused to it by the RBI, or it is wound up either voluntarily or compulsorily; or it ceases to be a banking company or a co-operative bank within the meaning of Section 36A(2) of the Banking Regulation Act, 1949; or it has transferred all its deposit liabilities to any other institution, or it is amalgamated with any other bank or a scheme of compromise or arrangement or of reconstruction has been sanctioned by a competent authority and the said scheme does not permit acceptance of fresh deposits. In the event of the cancellation of the registration of a bank, deposits of the bank remain covered by the insurance till the date of the cancellation.
DICGC covers insurance for all types of bank deposits, such as saving, fixed, current, and recurring, etc. except the following types of deposits.
(i) Deposits of foreign Governments;
(ii) Deposits of Central/State Governments;
(iii) Inter-bank deposits;
(iv) Deposits of the State Land Development Banks with the State co-operative banks;
(v) Any amount due on account of any deposit received outside India;
(vi) Any amount which has been specifically exempted by the corporation with the previous approval of the RBI.
Disclaimer: The information given above is to convey the basic provisions of the deposit insurance scheme of the Corporation. The information is of a non-technical nature and is not intended to be a legal interpretation of the deposit insurance scheme.