Deposit Insurance and Credit Guarantee Corporation (DICGC), set up to protect the interest of small bank depositors, has a larger percentage of number of accounts covered than the international benchmark. But in terms of amount, the insured deposits are less than what is prevalent internationally.

With the current deposit insurance limit of Rs 5 lakh, the number of fully protected accounts stands at 256.7 crore as of March-end 2022. This constitutes 97.9% of the total number of accounts (262.2 crore) compared to the international benchmark of 80%, the Reserve Bank of India’s annual report for 2021-22 showed.

In terms of amount, however, the insured deposits of Rs 81,10,431 crore accounted for 49% of total deposits (Rs 1,65,49,630 crore) as of March-end 2022, compared to 20-30% internationally.

A representative of this trend is the Punjab and Maharashtra Co-operative (PMC) Bank, which was mauled by lending fraud. While most of the depositors got covered under the deposit insurance scheme up to Rs 5 lakh, the high-value depositors had to make the sacrifice as they have to wait for 10 years to pull out their entire amount. A major chunk of the troubled urban co-operative bank’s total deposits came from these depositors.

The deposit insurance extended by DICGC, which is wholly owned by RBI, covers all commercial banks including local area banks (LABs), payments banks (PBs), small finance banks (SFBs), regional rural banks (RRBs) and cooperative banks. The DICGC fund is available for settlement of claims of depositors of banks gone into liquidation/ amalgamation and banks under RBI’s all-inclusive direction (AID). Once AID is imposed on an urban cooperative bank, the bank is restricted from discharging its liabilities except as permitted by RBI.

The number of registered insured banks as on March-end 2022 stood at 2,043, comprising 141 commercial banks (including 43 RRBs, 2 LABs, 6 PBs and 12 SFBs) and 1,902 cooperative banks (33 StCBs, 352 DCCBs, and 1,517 UCBs).

The total claims settled on account of liquidated banks and merger schemes amounted to Rs 5,059.2 crore in 2021-22. This comprised settlement of claims of nine liquidated urban co-operative banks totalling Rs 1,225.1 crore and Rs 3,791.6 crore provided to Unity Small Finance Bank for making payment to the depositors of the erstwhile PMC Bank after the latter’s merger with the former with effect from 25 January, 2022.

Additionally, an amendment to the DICGC Act in 2021-22 (relating to interim payments) helped settle claims worth Rs 3,457.4 crore relating to 22 urban cooperative banks under AID. As per the amendment, which came into force from 1 September 2021, interim insurance payment to depositors must be completed within 90 days from the date of imposition of AID by the RBI. The insured bank has to submit claims after imposition of such restriction within 45 days, and DICGC has to get the claims verified within 30 days and pay the depositors within the next 15 days. 

Overall, DICGC settled aggregate claims of Rs 8,516.6 crore under different channels during the year 2021-22.

The size of the Deposit Insurance Fund (DIF) stood at Rs 1,46,842 crore as on 31 March 2022, yielding a reserve ratio of 1.81%.