Deposit Insurance and Credit Guarantee Corporation (Ofer Abarbanel online library)

Deposit Insurance and Credit Guarantee Corporation (DICGC) is a subsidiary of Reserve Bank of India. It was established on 15 July 1978 under Deposit Insurance and Credit Guarantee Corporation Act, 1961 for the purpose of providing insurance of deposits and guaranteeing of credit facilities. DICGC insures all bank deposits, such as saving, fixed, current, Recurring deposit for up to the limit of Rs. 100,000 of each deposits in a bank.[1]

DICGC’s headquarters is in ‘Bombay and Deputy Governor of RBI .Shri B P Kanungo is the Chairman.

Legal Framework/Objective

The functions of the DICGC (Deposit Insurance and Credit Guarantee Corporation)are governed by the provisions of ‘The Deposit Insurance and Credit Guarantee Corporation Act, 1961’ (DICGC Act) and ‘The Deposit Insurance and Credit Guarantee Corporation General Regulations, 1961’ framed by the Reserve Bank of India in exercise of the powers conferred by sub-section (3) of Section 50 of the said Act.[2]

A maximum of ₹ 1,00,000 is insured for each user for both principal and interest amount. If the customer has accounts in different banks, all of those accounts are insured to a maximum of ₹ 1,00,000. However, if there are more accounts in same bank, all of those are treated as a single account. The insurance premium is paid by the insured banks itself. This means that the benefit of deposit insurance protection is made available to the depositors or customers of banks free of cost. The Corporation has the power to cancel the registration of an insured bank if it fails to pay the premium for three consecutive half-year periods. The Corporation may restore the registration of the bank, which has been de-registered for non-payment of premium, if the concerned bank makes a request in this behalf and pays all the amounts due by way of premium from the date of default together with interest.

Reforms

The Financial Sector Legislative Reforms Commission (FSLRC) was a body set up by the Government of India, Ministry of Finance, on 24 March 2011, to review and rewrite the legal-institutional architecture of the Indian financial sector. In its report the FSLRC recommended a regulatory structure constituting of seven agencies including a deposit insurance-cum regulatory agency (which was named as Resolution Corporation). The present DICGC will be subsumed into the Resolution Corporation (RC) which will work across the financial system. Drawing on the best international practice, the FSLRC proposal involved a unified resolution corporation that will deal with an array of financial firms such as banks and insurance companies; it will not just be a bank deposit insurance corporation. It will concern itself with all financial firms which make highly intense promises to consumers, such as banks, insurance companies, defined benefit pension funds, and payment systems. It will also take responsibility for the graceful resolution of systemically important financial firms, even if they have no direct links to consumers.[citation needed]

The Government of India introduced the Financial Resolution and Deposit Insurance bill, 2017 (FRDI bill) in Lok Sabha in the Monsoon session of 2017 to bring forth these reforms.[3] There have been many concerns with regards to the new bill like:

  1. Presently the banks have to pay a sum to the DICGC as insurance premium which insures all kinds of bank deposits up to a limit of ₹1,00,000. In case a stressed bank had to be liquidated, the depositors would be paid through DICGC. Though the Bill proposes the banks to pay a sum to the Resolution Corporation, it neither specifies the insured amount nor the amount a depositor would be paid. It is thus unclear how much a depositor would be paid in case of liquidation.
  2. The bail in clause which largely worked against the interests of the depositors(as in Cyprus).[4]

References

  1. ^“Srikrishna panel insists on single unified regulator in financial sector”. Business Standard. 21 March 2013. Retrieved 23 November 2013.
  2. ^“About Us – Profile”. ..Dicgc. Retrieved 23 November 2013.
  3. ^“PRS – Bill Track – The Financial Resolution and Deposit Insurance Bill, 2017”. www.prsindia.org. Retrieved 4 May 2018.
  4. ^“The FRDI Bill and concerns of the depositor”. The Hindu. 29 November 2017.

 

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