What is DICGC and How does It work?

The Reserve Bank of India's subsidiary, the Deposit Insurance and Credit Guarantee Corporation (DICGC), is a completely owned company (RBI). It offers deposit insurance, which serves as a safety net for bank depositors in the event that the bank is unable to make payments. Let's learn what DICGC is and how it works.

What is DICGC?

When a bank fails and cannot afford to pay its depositors, deposit holders are protected by deposit insurance. Deposit Protection and Credit Guarantee Corporation (DICGC), a fully owned subsidiary of the RBI, offers this insurance.Up to a maximum of Rs 5 lakh per bank, DICGC guarantees all bank deposits, including savings, fixed, current, and recurring deposits.

How DICGC Work?

If a bank has chosen DICGC cover, it will protect depositors' funds held in all Indian commercial and foreign banks, as well as central, state, and urban co-operative banks, regional rural banks, and local banks.

The Deposit Insurance and Credit Guarantee Corporation Act, 1961, and The Deposit Insurance and Credit Guarantee Corporation General Regulations, 1961, which were drafted by the RBI on performance of business in accordance with Section 50's subsection.

What DICGC Does Not Cover?

• Government deposits at the state or federal level
• foreign government deposits
• Deposits made by state land development banks at the state cooperative bank
• Interbank remittances
• Deposits received outside of India and money owed on account of India
• funds that the corporation had previously exempted with RBI clearance

Which banks are insured by the DICGC?

• Commercial Banks: The DICGC insures all commercial banks, including Indian branches of international banks, neighbourhood banks, and regional rural banks.
• Cooperative Banks: All State, Central, and Primary cooperative banks-also known as urban cooperative banks-that are operating in States and Union Territories that have amended their respective Cooperative Societies Acts to give the Reserve Bank of India (RBI) the authority to direct the local Registrar of Cooperative Societies to order the winding up of a cooperative bank or to replace its board of directors while requiring the Registrar not to take any action regarding winding up, am
• DICGC protects all cooperative banks.
• The DICGC does not provide insurance for primary cooperative groups.

What is the maximum amount covered by the DICGC?

Each depositor in a bank is covered by insurance up to the amount of 5,00,000 (Rupees Five Lakhs) for principal and interest amounts held by him same as on the date of liquidation/cancellation of the bank's licence or the date on which the scheme of amalgamation/merger/reconstruction comes into effect.