Deposit Insurance And Credit Guarantee Corporation (DICGC)
The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a state-owned corporation in India that insures deposits in banks and credit cooperatives. It is a key component of the Indian banking system, ensuring stability and confidence in the banking system.
Deposit Insurance:– Deposits up to INR 5 lakh are insured by the DICGC.- In the event of a bank failure, depositors are eligible for a full refund of their insured deposits.- The DICGC collects premiums from banks to cover the insurance fund.
Credit Guarantee Corporation:– The DICGC also acts as a credit guarantee corporation, providing guarantees for loans extended by banks to borrowers.- This guarantees cover a portion of the loan amount if the borrower defaults.- The fees for credit guarantee services are paid by banks.
Key Functions:
- Deposit Insurance: Protects depositors from loss of savings in the event of a bank failure.
- Credit Guarantee: Provides guarantees for loans, reducing credit risk for banks.
- Maintaining Stability: Ensures stability in the banking system by minimizing the impact of bank failures.
- Insuring Confidence: Builds confidence in the banking system by guaranteeing deposits.
Governance:
- The DICGC is a statutory corporation governed by the Deposit Insurance and Credit Guarantee Corporation Act, 1961.
- It is a separate legal entity from the Reserve Bank of India (RBI).
Funding:
- The DICGC is funded by premiums paid by banks and credit cooperatives.
- The premium rate is determined by the RBI.
Claims Settlement:
- The DICGC has a claims settlement process to ensure timely and fair compensation to depositors.
- Claims are settled according to the terms of the deposit insurance scheme.
Impact:
- The DICGC plays a crucial role in maintaining stability and confidence in the Indian banking system.
- It has prevented large-scale bank failures and protected depositors from potential losses.
- The DICGC has also facilitated credit flow by providing guarantees for loans.
Conclusion:
The Deposit Insurance and Credit Guarantee Corporation (DICGC) is an important institution in the Indian banking system, ensuring stability, confidence, and protection for depositors. Its functions are essential for maintaining the overall health and integrity of the banking system.
FAQs
What is DICGC and its functions?
The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a subsidiary of the Reserve Bank of India (RBI). Its primary function is to provide insurance to depositors in case a bank fails. It insures deposits up to a certain limit, ensuring that depositors are compensated if their bank cannot return their money.
What is the purpose of the DICGC scheme?
The purpose of the DICGC scheme is to protect small depositors by insuring their deposits in banks up to a specified limit. This helps maintain public confidence in the banking system and ensures financial stability.
What is the maximum limit of DICGC insurance?
The maximum limit of DICGC insurance is โน5 lakh per depositor per bank. This means that if a bank fails, each depositor is insured up to โน5 lakh, including the principal and interest.
Which banks are covered under DICGC?
DICGC covers all commercial banks, including branches of foreign banks operating in India, local area banks, regional rural banks, and cooperative banks. Some specific banks, like SBI and HDFC, are also covered under this scheme.
What is the primary purpose of deposit insurance?
The primary purpose of deposit insurance is to protect depositors’ savings by ensuring they receive compensation up to a certain limit if their bank fails. This mechanism helps prevent bank runs and promotes stability and trust in the banking system.
