A sizeable chunk of the total deposits held with Indian banks do not have insurance cover under the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme. As per the Economic Survey 2021-22, 49.1% of the bank deposits, amounting to Rs 73.5 lakh crore, are without the DICGC insurance cover. 

“In terms of amount, the total insured deposits (Rs 76.2 lakh crore) as at end-March 2021 constituted 50.9% (up from about 30% under Rs 1 lakh cover) of the total assessable deposits (Rs 149.7 lakh crore) as against the international benchmark of 20-30%,” the Survey said.

The government recently upped the DICGC insurance cover on deposits from Rs 1 lakh to Rs 5 lakh per depositor per bank. Even then the uncovered portion remains large in India as depositors hold deposits much above the maximum Rs 5 lakh cover in a particular bank.

As per the Survey, over Rs 1,500 crore has been paid to more than 1.2 lakh depositors of defaulting banks under the DICGC, since it came into existence in 1961.

The deposit insurance coverage that began with Rs 1,500 in 1961, was raised gradually to Rs 1 lakh in 1993. The amount remained static thereafter till 2020.

Under the DICGC (Amendment) Act, passed by Parliament in 2021, the Corporation is liable to pay the insured deposit amount to depositors of an insured bank. Such liability may arise when an insured bank undergoes liquidation, reconstruction or any other arrangement under a scheme, and merger or acquisition by another bank.

"Since the Act came into force, over Rs 1,500 crore has been paid to over 1.2 lakh depositors against their claims, as of early January 2022," the survey said.

With deposit insurance coverage of Rs 5 lakh per depositor per bank, the number of fully-protected accounts stood at 247.8 crore at end-March 2021, constituting 98.1% of the total number of accounts at 252.6 crore, as against the international benchmark of 80%.