PM addresses depositors in “Depositors First” programme

Tags: National News


Prime Minister Shri Narendra Modi addressed a function on “Depositors First: Guaranteed Time-bound Deposit Insurance Payment up to Rs. 5 Lakh” in New Delhi on 12th December 2021. Union Finance Minister Mrs Nirmala Sitharaman , and RBI Governor Mr. Shakti Kanta Das were among those present on the occasion. Highlights:

  • The Prime Minister informed that in India, the system of insurance for bank depositors came into being in the 60s. Earlier, out of the amount deposited in the bank, only the amount up to 50 thousand rupees was guaranteed. Then it was raised to one lakh rupees.That is, if the bank fails , then the depositors had a provision to get only up to one lakh rupees. There was no time limit on when this money would be paid.
  • Deposit insurance covers all deposits such as savings, fixed, current, recurring deposits, etc. in all commercial banks, functioning in India. Deposits in State, Central and Primary cooperative banks, functioning in States/Union Territories are also covered. In a path breaking reform, Bank deposit insurance cover was enhanced from Rs. 1 lakh to Rs. 5 lakh.
  • Earlier where there was no time limit for refund, now the government has made it mandatory within 90 days i.e. 3 months. That is, even in the event of a bank failing , the depositors will get their money back within 90 days.
  • With deposit insurance coverage of Rs. 5 lakh per depositor per bank, the number of fully protected accounts at end of previous financial year constituted 98.1% of the total number of accounts, as against the international benchmark of 80%.
  • The first tranche of interim payments has been released by the Deposit Insurance and Credit Guarantee Corporation recently, against claims received from depositors of 16 Urban Cooperative Banks which are under restrictions by RBI. Payout of over Rs 1300 crore has been made to alternate bank accounts of over 1 lakh depositors against their claims.
  • Reserve Bank of India (RBI) Governor Shaktikanta Das indicated that the banking regulator will ring in sweeping regulatory changes to reform urban cooperative banks that have been plagued by a spate of failures, and warned people against parking their savings in banks offering high returns.


Deposit Insurance and Credit Guarantee Corporation (DICGC) is a specialised division of Reserve Bank of India (RBI) which is under the jurisdiction of the Ministry of Finance, Government of India.

Coverage: Deposits in public and private sector banks, local area banks, small finance banks, regional rural banks, cooperative banks, Indian branches of foreign banks and payments banks are all insured by the DICGC.

The DICGC insures all deposits such as savings, fixed, current, recurring, etc. deposits except the following types of deposits:

  • Deposits of foreign Governments;
  • Deposits of Central/State Governments;
  • Inter-bank deposits;
  • Deposits of the State Land Development Banks with the State co-operative bank;
  • Any amount due on account of and deposit received outside India
  • Any amount, which has been specifically exempted by the corporation with the previous approval of Reserve Bank of India

Funds: The Corporation maintains the following funds :

  • Deposit Insurance Fund
  • Credit Guarantee Fund
  • General Fund
  • The first two are funded respectively by the insurance premia and guarantee fees received and are utilised for settlement of the respective claims.
  • The General Fund is utilised for meeting the establishment and administrative expenses of the Corporation.

Established: 15 July 1978

Headquarters: Mumbai, India


  • Deposit Insurance: It is a protection cover against losses accruing to bank deposits if a bank fails financially and has no money to pay its depositors and has to go in for liquidation.
  • Credit Guarantee: It is the guarantee that often provides for a specific remedy to the creditor if his debtor does not return his debt.
  • Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly-owned subsidiary of the Reserve Bank of India (RBI).
  • Despite being an insurance company, it is not regulated by the Insurance Regulatory and Development Authority (IRDA) but by Reserve Bank Of India (RBI).

DICGC Act, 1961

The Act established the Corporation to provide insurance for bank deposits and guarantee credit given by banks and financial institutions.

Under the DICGC Act,1961 the Corporation is liable to pay the insured deposit amount to depositors of an insured bank.

Such liability arises when an insured bank undergoes:

  • (i) liquidation, i.e., 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, i.e., transferee bank.

Once the Corporation makes the payment to the depositors, the liquidator or the insured or transferee bank (as the case may be) becomes liable to repay the same amount to the Corporation. The amount paid by the Corporation in respect of a deposit reduces its liability against the deposit by that amount. 

Deposit Insurance and Credit Guarantee Corporation Bill, 2021

DICGC Bill, 2021 was introduced by the Minister of Finance, Nirmala Sitharaman on July 30, 2021. This bill seeks to amend the DICGC Act, 1961.

  • The move came after Punjab and Maharashtra Co-operative (PMC) Bank faced a grave fraud. 
  • Subsequently, Yes Bank and Lakshmi Vilas Bank, too, came under stress, leading to their restructuring.
  • In a relief to depositors of stressed banks, the Cabinet cleared amendments to the Deposit Insurance Credit Guarantee Corporation (DICGC) Act, which will enable customers to have access to their deposits up to Rs 5 lakh within just 90 days, if their banks go bust and are placed under moratorium.

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