Deposit Insurance and Credit Guarantee Corporation (DICGC) is an organization constituted by Government of India which insures and covers all bank accounts of schedule commercial banks licensed by Reserve Bank of India. All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks, Co-operative Bnaks are insured by the DICGC.
How this DICGC Scheme works? In the event of a bank failure, DICGC protects bank deposits that are payable in India.
The DICGC insures all deposits such as savings, fixed, current, 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 bank;
(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 Reserve Bank of India.
Deposits in scheduled banks are insured up to Rs 1 lakh for that each schedule banks needs to pay certain premium to DICGC (now it is proposed to increase to Rs 2 lakh – please read news at the end of this aricle). So, if a bank goes into liquidation, the depositor is paid up to a maximum of Rs 1 lakh.
The deposits kept in different branches of a bank are aggregated for the purpose of insurance cover and a maximum amount upto Rupees one lakh is paid. If you have deposits with more than one bank, deposit insurance coverage limit is applied separately to the deposits in each bank. The DICGC insures principal and interest upto a maximum amount of Rs. One lakh. Banks have the right to set off their dues from the amount of deposits. The deposit insurance is available after netting of such dues.
Please note the following points in this connection.
1) Regardless of the number of accounts and branches in which the amount is deposited, the insurance cover is for the actual amount of loss, subject to a maximum of Rs. 1 lakh per individual per bank. Suppose you deposited Rs. 5 lakh each in 3 different branches of the same bank, as per rule you are eligible to get only Rs. 1 lakh insurance cover.
2) If the same individual operates different accounts in different capacities, each account would be insured up to Rs. 1 lakh separately.
3) In the case of joint accounts, accounts in various combinations of the same persons are added together and the combined total is insured up to Rs 1 lakh. Thus, when there are two accounts – one in the name of husband and wife and the other wife and husband – the insurance on the two accounts will be Rs 1 lakh. However, if the husband has one independent account and the wife has another, each account would be separately insured up to Rs 1 lakh. Although, logically, this may sound absurd, the scheme of insurance has been drafted in this fashion.
How will you know whether you bank is insured by the DICGC or not?
The DICGC while registering the banks as insured banks furnishes them with printed leaflets for display giving information relating to the protection afforded by the Corporation to the depositors of the insured banks. In case of doubt, depositor should make specific enquiry from the branch official in this regard. My opinion all bank customers' especially those who are having accounts with co-operative and regional banks must do this once in a while.
Conclusion
In India, RBI has given license to so many Scheduled Commercial Banks/ Regional Rural Banks promoted by various companies and individuals and RBI has got strict control over all these banks operating in both private and public sector. As an investor, we must ensure to deposit or bank with a well-established and reliable banks to minimize the risk. In the present situation Rs.1 lakh insurance cover is nothing (now proposed to Rs. 2 lakh), so there is a need to increase the insurance cover provided by DICGC Don't forget to mail your feedback/suggesctions to Prakash@yourownadviser.com
Best Regards
Prakash Nair Also read Recent News related to DICGC
DICGC Insurance cover also applicable to deposits in Co-operative Banks
The government has suggested DICGC and the RBI to adopt to risk-based deposit insurance premium structure. This will be prior to the DICGC proposal for increasing insurance coverage limit from Rs1 lakh to Rs2 lakh being approved
New Delhi: The deposit insurance coverage is also applicable to all eligible deposits in co-operative banks, Finance Minister P Chidambaram informed Rajya Sabah, reports PTI.
According to the existing norms of Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the Reserve Bank of India (RBI), a maximum of Rs1 lakh is paid to a depositor in case a bank goes insolvent. "In terms of the provisions of the Deposit Insurance and Credit Guarantee Corporation Act, the deposit insurance coverage is also applicable to the eligible deposits held in all eligible co-operative banks," Chidambaram said in a written reply.
He said the government has suggested DICGC and the RBI to adopt to risk-based deposit insurance premium structure. This will be prior to the DICGC proposal for increasing insurance coverage limit from Rs1 lakh to Rs2 lakh being approved. "DICGC has sent a proposal to increase the deposit insurance coverage limit from the existing Rs1 lakh to Rs2 lakh for approval of the government.
"The proposal was examined and to rationalise the deposit insurance premium structure, the government has suggested to the DICGC and the RBI to adopt to Risk-Based Deposit Insurance Premium Structure, before the proposal of the DICGC is considered for approval," Chidambaram said. 
