The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a subsidiary of the Reserve Bank of India (RBI) established to safeguard the interests of depositors in the event of a bank failure. DICGC provides coverage for deposits in various types of banks, including commercial banks, foreign bank branches, local area banks, regional rural banks, and co-operative banks. As of 31 March 2022, the cumulative amount of claims settled by DICGC stood at Rs. 10,820 crores.
The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a subsidiary of the Reserve Bank of India (RBI) established to safeguard the interests of depositors in the event of a bank failure. It was created in July 1978 by merging two earlier entities: the Depositors Insurance Corporation (DIC), and the Credit Guarantee Corporation of India Ltd. (CGCI). The DICGC operates under the Deposit Insurance and Credit Guarantee Corporation Act of 1961, which outlines its mandate to insure deposits and guarantee credit facilities.
DICGC provides coverage for deposits in various types of banks, including commercial banks, foreign bank branches, local area banks, regional rural banks, and co-operative banks. It encompasses deposits such as savings, fixed, recurring, and current accounts, excluding only those of foreign governments, central/state governments, and interbank deposits.
Insurance for deposit was increased to Rs. 5 lakhs in 2020
Each depositor is insured up to Rs. 5 lakh, which includes both the principal and interest amounts. This coverage limit was increased from Rs. 1 lakh to Rs. 5 lakh on 4 February 2020, as per RBI’s notification. The scheme is mandatory for all banks and cannot be opted out of, ensuring that depositors have a safety net in case of financial instability within the banking sector. While the deposit insurance premium is primarily paid by the insured bank, the benefits of deposit insurance accrue to depositors, providing them with a level of protection and security for their savings in the event of a bank failure.
DICGC pays the insured bank when it goes into liquidation so that the depositor’s money is secure
The deposit insurance premium is borne entirely by the insured bank. If a bank goes into liquidation, DICGC is liable to pay to the liquidator the claim amount of each depositor up to Rs. 5 lakhs within two months from the date of receipt of the claim list from the liquidator. The liquidator has to disburse the claim amount to each insured depositor corresponding to their claim amount.
Suppose, a bank is reconstructed or amalgamated/merged with another bank, the DICGC pays the bank concerned, the difference between the full amount of deposit or the limit of insurance cover in force at the time, whichever is less, and the amount received by him under the reconstruction/amalgamation scheme within two months from the date of receipt of claim list from the transferee bank or the authority of the Insured Bank. A detailed explainer of the scheme by Factly can be read here.
In this story, we look at the trends in the insurance claims settled and repayments received by all Liquidated, Amalgamated, and Reconstructed Banks under the DICGC Scheme. The data for this story has been compiled from the reports of the DGCIC and is available on Dataful.
Claims worth Rs. 10,820 crores have been settled as of 2022
As of 31 March 2022, the cumulative amount of claims settled stood at Rs. 10,820 crores compared to Rs. 5,762.7 crores as of 31 March 2021. This amount includes all types of repayments made to all Liquidated, Amalgamated, and Reconstructed Banks under the DICGC scheme. While the amount of claims settled increased steadily between 1999 and 2013, the amount was comparatively lower between 2015 and 2019. In 2021-22 alone, DGCIC settled claims amounting to Rs. 5,057.4 crores, close to the cumulative amount settled under the scheme since inception and as of 2018. In 2021-22, the Government passed the DICGC (Amendment) Act, 2021 under which account holders will get up to Rs. 5 lakhs within 90 days of the RBI imposing a moratorium on their banks from DICGC.
There are different types of repayment made to the respective bank. These are as follows:
- Full Repayment Received- These are the repayments made to the banks in full
- Repayment Received in Part and Balance due to Written Off- These are the repayments made to the banks in part as the remaining amount has been written off
- Part Repayment Received- These are the repayments made to the bank in parts
The data on the type of repayment is available for different types of banks- Commercial Banks and Co-operative Banks. Overall, the data shows that 97% of all the repayments for settlement of claims were made to co-operative banks as of 31 March 2022.
99% of the repayment to commercial banks was done in parts
For commercial banks, as of 31 March 2022, the total repayments stood at Rs. 295.8 crores. Out of this, Rs. 39.1 crores was full repayment, which amounted to about 13% of the total repayment. Nearly 60% of the total repayment i.e., Rs.175.01 crores was done in parts. About Rs. 81.73 crores were done partly with the balance written off.
In the case of co-operative banks, like commercial banks, a major share of repayment was done in parts. Out of the Rs.10,524 crores repaid, Rs.10,518 crores was done in parts, about 99%. The amount repaid fully was only Rs. 4.78 crores. Only about Rs. 78.3 lakhs was made in parts with the balance written off.
Significant portion of the payment in parts has been lying as balance
Of the repayments done in parts, the balance has reduced over the years. However, there is still a substantial amount lying as balance. As of 31 March 2022, for commercial banks, out of the total Rs. 175 crores repaid in parts, nearly 44% of the amount is the cumulative balance to be repaid. The cumulative balance was as high as Rs. 213.3 crores in 2003.
Meanwhile, in the case of cooperative banks, out of the total Rs. 10,512 crores done in part repayments, about Rs. 6,834 crores was the balance as of 31 March 2022. That is, only about 35% of the repayment was received and the remaining 65% stood as balance. Prior to 2022, the balance was on a decline and was only 38% of the repayment.
For commercial banks, 77% of the repayments had the balance written off
Of the claims settled, the repayments made to the banks in parts with the remaining amount written off was more in the case of commercial banks. As of 31 March 2022, Rs.78.3 lakhs was settled in this mode of repayment for cooperative banks. About 70% of the amount was written off and repayment made was Rs. 23.33 lakhs in this mode. In the case of commercial banks, Rs. 8,172.9 lakhs was the total amount of repayment made in this mode, out of which nearly 77%, about Rs. 6,258 lakhs was written off.
The DICGC plays a crucial role in safeguarding depositors’ interests in India, and the data discussed above reflects the trends in cumulative insurance claims settled and repayments received. It shows that a significant portion of repayments being made are in parts and some amount being written off.