Deposit Insurance


387

..

What is deposit insurance?

It is a limited level of protection provided by the government to depositors against bank failures. Every bank is mandatorily covered under the level of Deposit Guarantee and the Insurance Corporation of India. It is particularly relevant in countries like India where financial literacy is very low. At a macro-level, its objective is to contribute to the stability of the financial system.

..

Which entities are covered under deposit insurance in India?

All commercial banks, including the branches of foreign banks functioning in India, local area banks and regional rural banks are covered under the deposit insurance scheme. Even co-operative banks are covered. The scheme, however, does not cover deposits with NBFCs and company fixed deposits.

..

What is the amount covered and how is the premium charged?

Under the provisions of the DICGC Act, the insurance cover deposits up to Rs 100,000 under the deposit insurance. The premia to be paid by insured banks are computed on the size of their deposits. Insured banks pay advance insurance premia to the Corporation semi-annually, within two months from the beginning of each financial half-year, based on its deposits at the end of previous half year. The premium is currently pegged at Re 1 for every Rs 1,000 of the deposits.

..

What types of deposits are covered under the scheme?

The Corporation insures all bank deposits, such as savings, fixed, current, recurring, etc., except deposits of foreign governments; deposits of central/state governments, deposits of state land development banks with the state co-operative banks, inter-bank deposits, deposits received outside India.

..

How are the claims settled?

In the event of winding up or liquidation of an insured bank, every depositor is entitled to payment of an amount equal to the deposits held by him at all the branches of that bank as on the date of cancellation of registration (i.e., the date of cancellation of licence or order for winding up or liquidation), subject to set-off his dues to the bank, if any. However, the payment to each depositor is subject to the limit of the insurance coverage fixed from time to time.

..


..

Bibliography : The Economic Times

Click Here for  blink-related-articles

.
.
.
.
.
.
.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s