Is Your Bank Deposit Insured?

Every person must ensure to keep deposits in banks eligible for DICGC insurance cover and distribute deposits among different banks to guarantee that they all come within the maximum cover of ₹5 lakhs. Dr. Sampath Iyer elaborates on this issue.

- Dr. Sampath Iyer

Whenever a cus-tomer makes an inquiry about the safety of a bank, the bank officer or manager gives him a standard reply: “Our deposits are insured by DICGC”. While this reply may be technically correct, there many factors to be considered beginning from the basic follow-up question: What is DICGC? DICGC is Deposit Insurance and Credit Guarantee Corporation. Let’s dwell on this subject in detail. In 1948, immediately after independence, the Bengal Bank crises gave rise to the thought of insuring bank deposits to protect the hard-earned savings of citizens of the country. Initially, the Reserve Bank of India (RBI) was very reluctant to provide insurance until they built an adequate mechanism to inspect the books of the banks and their functioning in detail.

However, the failure of Palli Central Bank limited and laxmi Bank limited in 1960 hastened the process and the Deposit Insurance Corporation Bill was introduced in the parliament in August 1961 while the Deposit Insurance Act came into force on January 1, 1962. Numerous amendments to the act have been passed over 58 years of existence and the bank customer needs to note the following points which are in force as of date. All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks are insured by the DICGC. All state, central and primary cooperative banks, also called urban cooperative banks are covered under the Deposit Insurance Scheme.