Understanding Deposit Insurance

Understanding Deposit Insurance

The idea behind the Deposit Insurance is to boost the faith of the public in the banking system, and provides protection against the loss of deposits to a significant extent. In India, the bank deposits are covered under the insurance scheme provided by Deposit Insurance and Credit Guarantee Corporation (DICGC). DGCIC is a wholly owned subsidiary of the Reserve Bank of IndiaThe Reserve Bank of India was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934 with ......
So, Banks are insured by the DICGC.

Please note that :

• All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banksNarasimham Committee and Genesis of RRBs We all know that the first stage of nationalization that took place in 1969 boosted the confidence of the public ..... are insured by the DICGC.
  
• All State, Central and Primary cooperative banks, also called urban cooperative banks, functioning in States / Union Territories are covered under the Deposit Insurance System.
  
• At present all co-operative banks other than those from Meghalaya, Chandigarh, Lakshadweep and Dadra and Nagar HaveliDadra and Nagar Haveli : General InformationPopulation (2001 Census):220490Males:121666Females:98824Urban Population %:29.89Literacy Rate (Census 2001) In %:57.6Male Literacy In %:71.2Male Literate In Numbers:72149Female Literacy In %:40.2Female ..... are covered under the deposit insurance system of DICGC.
  
• Primary cooperative societies (PACS) , which are village level cooperatives and disburse short term credits in the country are NOT insured by the DICGC. So around 95000 PACS in the country are out of coverage of the DICGC.
  

The DICGC insures all deposit accounts including savings, fixed, current, recurring, except:

1. Deposits of the Foreign Governments
   
2. Deposits of the Central and State Governments.
   

Please note that the maximum amount per depositor insured is ` 1 Lakh including Principal and Interest. This means that

• If a person has principal amount of ` 91000 and interest ` 7,000 then the amount isured by DICGC is ` 98000.
  
• However, if the same person has deposits ` 98000 and interest ` 8000 then , the amount insured by the DICGC would be ` 1 Lakh.
  
• The insurance cost is borne by the bank which is insured. The DGCIC charges 10 paise per ` 100 as insurance premiumIf an investor buys a security for a price above its eventual value at maturity he has paid a premium for it. .