Deposit Insurance and Credit Guarantee Corporation (DICGC) recently increased the premium for deposit insurance due to the increasing risk of bank failures. But that is not the only issue today, there is a need for wide-scale reforms in DICGC to ensure that the objective for which it was established is achieved. The major reform processes required are: Timely settlement of compensations, compulsion of premium payment by banks in the interest of depositors,etc.
Deposit Insurance and Credit Guarantee Corporation popularly known as DICGC was established by an Act of Parliament on January 1, 1962 with the noble cause of providing insurance to depositors for the money they deposit in banks. The authorized capital of Rs. 50 cr is fully issued and subscribed by the RBI. The management of corporation is vested upon the Board of Directors, of which a Deputy Governor of the RBI is the Chairman.
The insurance for depositors against the loss of all or part of their deposits in all the branches of a bank is limited to a maximum of Rs. 1,00,000. The corporation also provides guarantee support to a bank for credit extended by them to small borrowers and small scale industries, except in the cases where the loans are guaranteed by central/state governments and Export Credit Guarantee Corporation.
Though the deposit insurance scheme is compulsory and no bank has the choice to withdraw from the scheme, the corporation may cancel the registration of an insured bank, if it fails to pay the premium for three consecutive periods. Of course, the corporation will notify the general public through newspapers while withdrawing its coverage for default of premium. The depositor who believes that his deposits are insured, suddenly finds himself in the lurch. |
