ForumIAS announcing GS Foundation Program for UPSC CSE 2025-26 from 19 April. Click Here for more information.
ForumIAS Answer Writing Focus Group (AWFG) for Mains 2024 commencing from 24th June 2024. The Entrance Test for the program will be held on 28th April 2024 at 9 AM. To know more about the program visit: https://forumias.com/blog/awfg2024
Contents
What is the News?
The Union Cabinet has approved amendments to the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961.
What are the amendments approved?
Faster Process:
- The depositors will be provided funds up to Rs 5 lakh within 90 days in the event of a bank coming under the moratorium imposed by the RBI.
- Earlier, depositors end up waiting for 8-10 years before they are able to access their deposits in a distressed bank only after its complete liquidation.
- Coverage: All commercial banks and even branches of foreign banks operating in India will come under the purview of this amendment and this will be applicable to banks which are at present under moratorium.
- Prospective: The proposed law is prospective and not retrospective.But it will cover banks already under moratorium and those that could come under moratorium.
Increase in Insurance Premium:
- The government has increased the deposit insurance premium by 20% immediately, and maximum by 50%.The premium is paid by banks to the DICGC.
Earlier Changes:
- In 2020, the Government of India has raised the Deposit insurance cover from Rs 1 lakh to Rs 5 lakh.
- Due to this, 3% of all deposit accounts by number and 50.9% of deposits by value were covered under Deposit insurance.
- Globally, deposit insurance coverage is only 80% globally and it covers only 20-30% of deposit value.
About DICGC:
- Deposit Insurance and Credit Guarantee Corporation(DICGC) is a subsidiary of the Reserve Bank of India(RBI).
- It was established in 1978 as a statutory body under Deposit Insurance and Credit Guarantee Corporation Act,1961.
- The act provides for the establishment of a Corporation for the purpose of insurance of deposits and guaranteeing of credit facilities and for other matters connected therewith or incidental thereto.
- The Deputy Governor of RBI acts as its Chairman of DICGC.It is headquartered in Mumbai.
Coverage of DICGC:
- Deposits in public and private sector banks, local area banks, small finance banks, regional rural banks, cooperative banks, Indian branches of foreign banks and payments banks are all insured by the DICGC.
- In the event of a bank going distressed in India, a depositor can claim a maximum of Rs 5 lakh per account as insurance cover — even if the deposit in their account far exceeds Rs 5 lakh.
