Deposit insurance is critical for protecting the interest of small bank depositors. In India, Deposit Insurance and Credit Guarantee Corporation (DICGC), wholly owned by the RBI provides insurance cover to bank depositors.
According to the RBI’s Annual Report 2021-22, going by the current deposit insurance limit of Rs. 5 lakh, 257 crore accounts or almost 98% of the total accounts were fully protected as of March-end 2022, compared to the international benchmark of 80%. In terms of amount, however, the insured deposits of Rs. 81.1 trillion accounted for 49% of the total deposits as of March-end 2022 versus 20-30% internationally.
The deposit insurance offered by DICGC covers all commercial banks including local area banks, payments banks, small finance banks, regional rural banks and cooperative banks. The DICGC fund is available for settlement of claims of depositors of banks gone into liquidation/ amalgamation and banks under RBI’s all-inclusive direction (AID). Once AID is imposed on an urban cooperative bank, the bank is restricted from discharging its liabilities except as permitted by RBI.
