Banking Term: DICGC

DICGC was established for the purpose of providing insurance of deposits and guaranteeing of credit facilities.

Created On: Sep 23, 2016 18:27 IST

SBI is all set to conduct the Mains exam for recruitment of Probationary officer (PO) on 31st July. Here the banking team of jagran josh is providing the description of important Banking term for SBI PO Main 2016. Candidates appearing for SBI PO Main examination 2016 must read it and strengthen their preparation of General/Economy Banking Awareness.

The Main examination would be of objective type and would be of 3 hours duration. The candidates are required to qualify in each of the tests by securing passing marks, to be decided by banks.

DICGC stands for Deposit Insurance and Credit Guarantee Corporation (DICGC). DICGC was established for the purpose of providing insurance of deposits and guaranteeing of credit facilities.

History of DICGC

The concept of insuring deposits kept with banks received attention for the first time in the year 1948 after the banking crises in Bengal. However, serious thought to the concept was given by the RBI and the Central Government after the crash of the Palai Central Bank Ltd., and the Laxmi Bank Ltd. in 1960. The Deposit Insurance Corporation (DIC) Bill was introduced in the Parliament in 1961. After it was passed by the Parliament, the Deposit Insurance Act, 1961 came into force on January 1, 1962.

Further, the Government of India, in consultation with the RBI, introduced a Credit Guarantee Scheme in July 1960. The main thrust of the Credit Guarantee Schemes, introduced by the Credit Guarantee Corporation of India Ltd (CGIL)., was aimed at encouraging the commercial banks to cater to the credit needs of the hitherto neglected sectors, particularly the weaker sections of the society engaged in non-industrial activities, by providing guarantee cover to the loans and advances granted by the credit institutions.

With a view to integrating the functions of deposit insurance and credit guarantee, the above two organizations (DIC & CGCI) were merged and the present Deposit Insurance and Credit Guarantee Corporation (DICGC) came into existence on July 15, 1978.  

What does the DICGC insure?

In the event of a bank failure, DICGC protects bank deposits that are payable in India. The DICGC insures all deposits such as savings, fixed, current, recurring, etc. except the following types of deposits.

  1. Deposits of foreign Governments;
  2. Deposits of Central/State Governments;
  3. Inter-bank deposits;
  4. Deposits of the State Land Development Banks with the State co-operative bank;
  5. Any amount due on account of any deposit received outside India
  6. Any amount, which has been specifically exempted by the corporation with the previous approval of Reserve Bank of India.

Which banks are insured by the DICGC?

All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks are insured by the DICGC. At present all co-operative banks other than those from the States of Meghalaya, and the Union Territories of Chandigarh, Lakshadweep and Dadra and Nagar Haveli are covered under the deposit insurance system of DICGC.

Note: The deposit insurance scheme is compulsory and no bank can withdraw from it.

What is the maximum deposit amount insured by the DICGC?

Each depositor in a bank is insured upto a maximum of Rs.1,00,000 (Rupees One Lakh) for both principal and interest amount held by him in the same capacity and same right as on the date of liquidation/cancellation of bank's licence or the date on which the scheme of amalgamation/merger/reconstruction comes into force.

When is the DICGC liable to pay? 

If a bank goes into liquidation: The DICGC is liable to pay to each depositor through the liquidator, the amount of his deposit upto Rupees one lakh within two months from the date of receipt of claim list from the liquidator.

If a bank is reconstructed or amalgamated / merged with another bank: Where in respect of an insured bank a scheme of compromise or arrangement or of reconstruction or amalgamation has been sanctioned by any competent authority, this scheme protects bank deposits for each depositor.

How would individual know whether his/her bank is insured by the DICGC or not?

The DICGC while registering the banks as insured banks furnishes them with printed leaflets for display giving information relating to the protection afforded by the Corporation to the depositors of the insured banks.

What is the ceiling on amount of Insured deposits kept by one person in different branches of a bank?

The deposits kept in different branches of a bank are aggregated for the purpose of insurance cover and a maximum amount upto Rupees one lakh is paid.

Can deposit insurance be increased by depositing funds into several different accounts all at the same bank?

All funds held in the same type of ownership at the same bank are added together before deposit insurance is determined. If the funds are in different types of ownership or are deposited into separate banks they would then be separately insured.

Are deposits in different banks separately insured?

Yes, If you have deposits with more than one bank, deposit insurance coverage limit is applied separately to the deposits in each bank.


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