Page 157 - economic_survey_2021-2022

Monetary Management and Financial Intermediation 131

insured bank. Such liability may arise when an insured bank undergoes: (i) liquidation (sale of all
assets on closing down of the bank) (ii) reconstruction or any other arrangement under a scheme,
or (iii) merger or acquisition by another bank. Deposit insurance provided by DICGC covers all
commercial banks, including Payment Banks, Small Finance Banks, Regional Rural Banks, Foreign
Bank branches in India, Local Area Banks and Co-operative Banks in all States and Union Territories.
DICGC registers a bank as insured immediately and automatically when a banking license is issued
to it. The deposit insurance premium is compulsory for all insured banks and is paid by banks to
DICGC and is not recovered from the depositors.

The deposit insurance coverage that began with `1500 in 1961 has been raised gradually to `1 lakh
in 1993 but had been static thereafter till 2020. After the announcement in the Union budget 2020-
21, the deposit insurance cover was increased from `1 lakh to `5 lakh per depositor per bank. With
deposit insurance coverage of `5 lakh per depositor per bank, the number of fully protected accounts
(247.8 crore) at end-March 2021 constituted 98.1 per cent of the total number of accounts (252.6
crore), as against the international benchmark of 80 per cent. In terms of amount, the total insured
deposits (`76.2 lakh crore) as at end-March 2021 constituted 50.9 per cent (up from about 30 per cent
under `1 lakh cover) of the total assessable deposits (`149.7 lakh crore) as against the international
benchmark of 20-30 per cent. Bank-group wise, the percentage of insured deposits vis-à-vis total
deposits is 84 per cent for RRBs, 70 per cent for cooperative banks, 59 per cent for SBI, 55 per cent
for PSBs, 40 per cent for private sector banks and 9 per cent for foreign banks. Up to 31st March
2021, a cumulative amount of `5,763 crores has been paid towards claims since the inception of
deposit insurance (`296 crore in respect of 27 commercial banks and `5,467 crores in respect of 365
co-operative banks).
However, one continuing concern even after the increase in insured amount announced in February
2020 in the Union Budget 2020-21 was that when various restrictions, such as moratorium, etc are
imposed on a bank by RBI, genuine depositors continued to face serious difficulties, and were unable
to access their own money even to the extent of the insured value, despite deposit insurance being in
place. Therefore, the Deposit Insurance And Credit Guarantee Corporation (Amendment) Act, 2021
was enacted. The following are the key features of the Amendment Act:
● Introduced interim payments: Interim payment will now be made by DICGC to depositors of
those banks for whom any restrictions/ moratorium have been imposed by RBI under the Banking
Regulation Act resulting in restrictions on depositors from accessing their own savings.
● Timeline for interim payments: Clear-cut timeline of maximum of 90 days has been fixed for
providing interim payment to depositors. Within the first 45 days, the insured bank must furnish
the details of all outstanding deposits to the Corporation. Within 30 days of the receipt of details,
the Corporation will verify the authenticity of the claims and within 15 days of the verification,
the Corporation must make the payment to such depositors.

● Repayment by banks to DICGC
 Deferment of repayments: DICGC may defer repayments due to it from an insured bank after
insurance pay out, on terms decided by DICGC’s Board. It is in spirit with the rationale of
interim payments, i.e., to help depositors while also enabling rescue efforts for the bank.