A Guide to Deposit Insurance and Credit Guarantee Corporation (DICGC)

Summary: The Deposit Insurance and Credit Guarantee Corporation (DICGC), operating under the Reserve Bank of India, ensures depositor confidence by providing insurance coverage for deposits up to ₹5 lakh per depositor per bank. This insurance protects depositors in the event of a bank failure, covering most types of deposits except those from foreign governments, central/state governments, inter-bank deposits, and a few other exceptions. Banks are required to submit a Deposit Insurance Return (Form DI-02) biannually, detailing their deposit liabilities to assess risk and determine the necessary insurance coverage. The DICGC premium, calculated as a percentage of total deposits, is currently set at 6 paise per ₹100 of deposits per half-year. This premium is essential for maintaining financial stability and reflects the health of banks, as those with higher risk profiles or more deposits pay more. Non-compliance with submission deadlines or falsification of returns can result in penalties, including fines, interest charges, and imprisonment for serious offenses. Overall, the DICGC plays a critical role in safeguarding depositors’ money and fostering trust in India’s banking system.

Introduction:

• The DICGC is an entity developed to work under the Reserve Bank of India for maintaining depositor confidence in the system and accomplishing financial stability.
• DICGC provides insurance on deposit to the depositor, in case if bank goes wrong ways. The basic goal is to maintain the security of depositors guaranteeing payment of insurance provided in our favour up to ₹5 lakh per depositor per bank. This is the amount that depositors can receive their savings securely, even if a bank has gone bankrupt.

Compliance:

• A Deposit Insurance Return is a report that banks are required to submit to the Deposit Insurance and Credit Guarantee Corporation (DICGC).
• This document contains details about the deposits with the bank which helps DICGC in assessing risk and to set-up the insurance cover for depositors. The return normally includes aggregate deposit data (total deposits, by type) and information related to other liabilities.
• According to section 34 (1) of the DICGC Act all insured banks are required periodically furnish in such form as may be specified by Corporation Returns or Statements containing particulars regarding deposits.
• Registered insured banks must submit Form DI-02 ­­­­in the prescribed format.

https://www.dicgc.org.in/pdf/2023/Banks/Circulars/DI_FormFormat.pdf

• The due date for submission

• The insured banks are required to submit the Form DI – 02 along with the Certificate issued by Statutory Auditors for both half years as well as annual.

Calculation of Assessable Deposits:

• The DICGC insures all deposits such as savings, fixed, current, recurring, etc. deposits except the following types of deposits:
  • Deposits of foreign Governments;
  • Deposits of Central/State Governments;
  • Inter-bank deposits;
  • Deposits of the State Land Development Banks with the State co-operative bank;
  • Any amount due on account of and deposit received outside India
  • Any amount, which has been specifically exempted by the corporation with the previous approval of Reserve Bank of India

Calculation of Premium Payable:

• The DICGC premium is inclusive of the deposits held by bank for which calculation ID based on total deposit. Most notably, this premium is determined by the amount of deposits that a bank has on hand and it operates as a percentage with different rates for various types of deposits. This percentage is decided by DICGC and reviewed periodically.
• At present the rate of premium payable is 6 paise per half year per Rs.100 of deposits held.

Importance of DICGC Premium:

• Ensures Deposit Safety: The premium paid for the insurance fund protects the depositor’s money. The premiums are what DICGC would otherwise draw upon in the event of a bank failure to save depositors.
• Promotes Financial Stability: The premiums levied on banks in the form of an insurance safety net are used for the purpose of ensuring overall financial stability which enhances confidence. It enhances depositors’ trust in the banking system.
• Reflects Bank Health: It can reflect the health of the bank, wherein banks with more deposits or higher risk profiles pay more premiums, indirectly communicating their situation.

Penalties:

• In case of failure to submit return:
  • On failure of timely submission of DI returns the insured bank is shall be punishable with a fine up to Rs. 2,000/- for each offence and additional fine up to 100/- per day during the continuation of such failure.
• In case of failure to pay premium:
  • On failure to pay in full or part the premium shall attract penal interest at the Bank Rate + 8% per annum on the default amount from beginning of half year till the date of receipt of the premium at DICGC, Mumbai.
• In case of falsification or misstatement in returns:
  • On wilful falsification or omission of material statements in the DI Return the official authorised shall be punishable with imprisonment for a term extendable to 3 years and shall also be liable to fine for wilfully stating false particulars or omitting material statements in the Return.

Conclusion:

• The DICGC covers all commercial and cooperative banks, thereby providing complete coverage of the banking landscape.
• The premium helps in establishing trust and stability in the system of banking by providing confidence to the depositor that the money lying in the respective bank will be safe.
• It is a small yet vital part of the financial aid that supports India’s banking system.

Authors:

Mohit Gurjar | Senior Manager |  Mobile No: 9602701969 | Email ID: [email protected]

Kashish Bhandari | Article Assistant