Deposit Insurance & DICGC — ₹5 Lakh Coverage, Premium & Claim Process

Deposit Insurance is a crucial safety net for bank depositors in India, provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the Reserve Bank of India. Following the amendment in 2021, the coverage limit was enhanced to ₹5 lakh per depositor per bank, and a time-bound mechanism for claim settlement was introduced. This topic is frequently tested in JAIIB PPB and understanding DICGC's role, coverage limits, premium structure, eligible deposits, and claim process is essential for all banking professionals.

What is DICGC?

The Deposit Insurance and Credit Guarantee Corporation (DICGC) was established in 1978 by merging the Deposit Insurance Corporation (established 1962) and the Credit Guarantee Corporation of India. It operates under the DICGC Act, 1961. DICGC is a wholly-owned subsidiary of the RBI with an authorized capital of ₹50 crore. Its primary function is to provide insurance to depositors of insured banks against the loss of their deposits in case of bank failure, liquidation, or reconstruction.

The DICGC insures deposits of all commercial banks including regional rural banks, local area banks, foreign banks with branches in India, cooperative banks, and small finance banks. Payment banks are also covered. However, deposits of State/Central Governments, inter-bank deposits, and deposits received outside India are not insured.

Coverage Limit — ₹5 Lakh

The ₹5 lakh limit was enhanced from the earlier ₹1 lakh following the 2020 amendment (DICGC Amendment Act, 2021). The coverage includes all deposit accounts — savings, fixed deposit, current account, and recurring deposits. Joint accounts are treated separately from individual accounts of the same depositor. For example, if a person has an individual FD of ₹3 lakh and a joint FD of ₹4 lakh in the same bank, the individual account is fully covered (₹3 lakh), and the joint account is also separately covered up to ₹5 lakh.

Premium Structure

The insurance premium is paid by the insured bank (not by depositors). The current premium rate is 12 paise per ₹100 of assessable deposits per annum (i.e., 0.12% per annum). The premium is paid in two half-yearly instalments. Assessable deposits include all deposits except those specifically excluded (government deposits, inter-bank deposits, etc.). Banks cannot recover this premium from their customers.

Eligible vs Non-Eligible Deposits

Claim Process & Timeline (Post-2021 Amendment)

The DICGC Amendment Act, 2021 introduced a time-bound settlement mechanism. When a bank is placed under moratorium, restriction, or directed to be wound up, the following timeline applies: (a) Within 45 days of the RBI imposing restrictions, the insured bank must provide DICGC with the list of depositors and amounts due; (b) DICGC must pay the insured amount within 90 days from the date of imposition of restrictions. This ensures depositors don't face prolonged uncertainty during bank stress events.

Prior to this amendment, depositors often had to wait years during bank liquidation proceedings to receive their insured amounts. The 90-day timeline is a landmark reform ensuring prompt access to insured deposits. The DICGC can also seek interim payment from the RBI's Deposit Insurance Fund if needed to meet the timeline.

Key Points for JAIIB Exam

Sample MCQs for JAIIB PPB