Deposit Insurance And Credit

Guarantee Corporation (DICGC)

What is DICGC?

• Deposit Insurance and Credit Guarantee Corporation (DICGC) is a

wholly-owned subsidiary of the Reserve Bank of India (RBI). It
provides deposit insurance that works as a protection cover for bank
deposit holders when the bank fails to pay its depositors.
• The agency insures all kinds of deposit accounts of a bank, such as
savings, current, recurring, and fixed deposits up to a limit of Rs. 5
lakh per account holder per bank.
• In case an individual's deposit amount exceeds Rs.5 lakh in a single
bank, only Rs.5 lakh, including the principal and interest, will be paid
by DICGC if the bank becomes bankrupt.
Objective of the Act

• The preamble of the Deposit Insurance and Credit Guarantee

Corporation Act, 1961 states that it is an Act to provide for the
establishment of a Corporation for the purpose of insurance of
deposits and guaranteeing of credit facilities and for other matters
connected therewith or incidental thereto.
What DICGC Does Not Cover?

• Deposits of state or Central governments

• Deposits from foreign governments
• State land development banks depositing with the state co-operative bank
• Inter-bank deposits
• Funds that are due on account of India and deposits received outside India
• Funds exempted by the corporation with the previous approval from RBI
Establishment and incorporation of Deposit
Insurance Corporation.
• Sec 3 -
• (2) The head office of the Corporation shall be at Mumbai, but it may,
with the previous sanction of the Reserve Bank, establish branches or
agencies in any other place in India.
Capital of Corporation
• Sec 4 – (1) The authorised capital of the Corporation shall be one
crore of rupees but the Central Government may, in consultation with
the Reserve Bank, increase such capital from time to time, so
however, that the total authorised capital shall not exceed fifty crores
of rupees.
• (2) The issued capital for the time being of the Corporation shall be
fully paid-up and shall stand allotted to the Reserve Bank.
Sec 5 -
• The general superintendence, direction and the management of the
affairs and business of the Corporation shall vest in a Board of
directors which may exercise all powers and do all acts and things
which may be exercised or done by the Corporation.
The Board of directors of the Corporation
shall consist of the following, namely
• 6. (1) :- (a) the Governor, for the time being, of the Reserve Bank or, if the Reserve Bank, in pursuance
of the decision of the committee of the Central Board of Directors of that Bank, nominates any
Deputy Governor for the purpose, the Deputy Governor so nominated, who shall be the Chairman of
the Board;
• (b) a Deputy Governor or any other officer of the Reserve Bank nominated by that bank;
• (c) an officer of the Central Government nominated by that Government;
• (d) five directors nominated by the Central Government in consultation with the Reserve Bank, three
of whom shall be persons having special knowledge of commercial banking, insurance, commerce,
industry or finance and two of whom shall be persons having special knowledge of, or experience in,
cooperative banking or co-operative movement,
• (e) four directors, nominated by the Central Government in consultation with the Reserve Bank,
having special knowledge or practical experience in respect of accountancy, agriculture and rural
economy, banking, co-operation, economics, finance, law or small scale industry or any other matter,
the special knowledge of, and practical experience in which, is likely in the opinion of the Central
Government, to be useful to the Corporation.
Disqualifications to be a director
• (a) he has been removed or dismissed from the service of Government
or of a local authority or of a corporation or company in which not less
than fifty-one per cent of the paid-up share capital is held by
Government; or
• (b) he is or at any time has been adjudicated as insolvent or has
suspended payment of his debts or has compounded with his creditors;
or .
• (c) he is of unsound mind and stands so declared by a competent court;
or
• (d) he has been convicted of any offence which, in the opinion of the
Central Government, involves moral turpitude
Sec 10
• The Corporation shall register every existing banking company as an
insured bank before the expiry of thirty days from the date of
commencement of this Act
Sec 11
• The Corporation shall register every new banking company as an
insured bank as soon as may be after it is granted a licence under
section 22 of the Banking Regulation Act, 1949.
Cancellation of registration
• 13. (1) The registration of a banking company as an insured bank shall stand cancelled on the
occurrence of any of the following events, namely:
• (a) if it has been prohibited from receiving fresh deposits; or
• (b) if it has been informed by notice in writing by the Reserve Bank that its licence has been
cancelled under section 22 of the Banking Regulation Act,1949 or that a licence under that section
cannot be granted to it; or
• (c) if it has been ordered to be wound up; or
• (d) if it has transferred all its deposit liabilities in India to any other institution; or
• (e) if it has ceased to be a banking company within the meaning’ under Banking Regulation Act,
1949, or has converted itself into a non-banking company; or
• (f) if a liquidator has been appointed in pursuance of a resolution for the voluntary winding up of its
affairs; or
• (g) if in respect of it any scheme of compromise or arrangement or of reconstruction has been
sanctioned by any competent authority and the said scheme does not permit the acceptance of
fresh deposits; or
• (h) if it has been amalgamated with any other banking institution.
• 14. (1) Where the Corporation has registered any banking company,
Regional Rural Bank or co-operative bank as an insured bank, it shall,
within thirty days of its registration, send an intimation in writing to
the banking company, Regional Rural Bank or co-operative bank that
it has been registered as an insured bank.
• (2) Every such intimation shall indicate the manner in which the
premium payable by the bank under section 15 may be calculated.
Sec 15 -
• Every insured bank shall, so long as it continues to be registered, be
liable to pay a premium to the Corporation on its deposits at such rate
or rates as may, with the previous approval of the Reserve Bank, be
notified by the Corporation, from time to time, to the insured banks
and different rates may be notified for different categories of insured
banks.
• Provided that the premium payable by any insured bank for any
period shall not exceed fifteen paise per annum for every hundred
rupees of the total amount of the deposits in that bank at the end of
that period or, where its registration has been cancelled during that
period, on the date of its cancellation.
Sec 15 A
• 1) The Corporation may cancel the registration of an insured bank if it
fails to pay the premium for three consecutive periods : Provided that
no such registration shall be cancelled except after giving to the
concerned bank one month’s notice in writing calling upon that bank
to pay the amount in default.
• (2) The Corporation may restore the registration of a bank whose
registration has been cancelled under sub-section (1), if the
concerned bank requests the Corporation to restore the registration
and pays all the amounts due by way of premia from the date of
default till the date of payment together with interest due thereon,
on the date of payment.
Liability of Corporation in respect of insured
deposits.
• 16. (1) Where an order for the winding up or liquidation of an
insured bank is made, the Corporation shall, subject to the other
provisions of this Act, be liable to pay to every depositor of that bank
in accordance with the provisions of section 17 an amount equal to
the amount due to him in respect of his deposit in that bank at the
time when such order is made
Manner of payment by Corporation in case of
winding up of an insured bank.
• 17. (1) Where an insured bank has been ordered to be wound up or to be taken
into liquidation and a liquidator, by whatever name called, has been appointed
in respect thereof, the liquidator shall, with the least possible delay and in any
case not later than three months from the date of his assuming charge of office
• (2) Before the expiry of two months from the receipt of such list from the
liquidator, the Corporation shall pay the amount payable under section 16 in
respect of the deposit of each depositor:
• (a) directly to the depositor, or
• (b) to the depositor through such agency as the Corporation may determine, or
• (c) to the liquidator
Manner of payment by Corporation in case of scheme of compromise or arrangement or of reconstruction or amalgamation in respect of an
insured bank.

• 18. (1) Where a scheme of amalgamation of any insured bank with any
other banking institution (hereinafter referred to as the transferee bank) or
a scheme of compromise or arrangement or of reconstruction in respect of
such bank has been sanctioned and the Corporation has become liable to
pay to depositors of the insured bank under sub-section (2) of section 16,
the transferee bank where the scheme is of amalgamation and the insured
bank in any other case shall, with the least possible delay and in any case
not later than three months from the date on which such scheme, takes
effect
Discharge of the liability of Corporation
• 19. Any amount paid by the Corporation under section 17 or section
18 in respect of a deposit shall, to the extent of the amount paid,
discharge the Corporation from its liability in respect of that deposit.
Provision for unpaid amounts.
• 20. Where any depositor to whom any payment is to be made in
accordance with the provisions of section 17 or section 18 cannot be
found or is not readily traceable, adequate provision shall be made
by the Corporation for such payment and the amount of such
provision shall be accounted for separately in its books.
Repayment of the amount to Corporation
• 21. (1) Where any amount has been paid under section 17 or section
18 or any provision therefor has been made under section 20, the
Corporation shall furnish to the liquidator or to the insured bank or to
the transferee bank, as the case may be, information as regards the
amount so paid or provided for
CHAPTER III-A CREDIT GUARANTEE
FUNCTIONS
• - “Credit facility” means any financial assistance, including a loan or
advance, cash credit, overdraft, bills purchased or discounted, a term
or instalment credit and any guarantee other than a performance
guarantee, granted or issued in India by a credit institution at any of
its offices in India.
Guaranteeing of credit facilities and
indemnifying credit institutions
• 21.A(1) The Corporation may guarantee credit facilities given by any
credit institution and may also indemnify credit institutions in respect
of credit facilities granted by them.
• (2) The Board may, for the purpose of guaranteeing credit facilities
granted by credit institutions, or indemnifying credit institutions,
frame one or more schemes in such form and in such manner and
containing such provisions as the Board may, from time to time, deem
fit.
• (3) The Board may levy, on every credit institution availing itself of the
guarantees or indemnities provided by the Corporation, a fee at such
rate or rates as may, with the previous approval of the Reserve Bank.
Corporation to act as an agent of Central
Government
• 21B. The Corporation may act as agent for the Central Government-
• (i) in guaranteeing the due performance by any small-scale industrial.
• (ii) in making, as such agent, of payments in connection with such
guarantee
CHAPTER IV FUNDS, ACCOUNTS AND
AUDIT
• 22. The Corporation shall maintain three funds to be called
respectively the
• Deposit Insurance Fund
• the Credit Guarantee Fund
• the General Fund.
Deposit Insurance Fund
• 23. (1) To the Deposit Insurance Fund shall be credited, -
• (a) all amounts received by the Corporation as premium;
• (b) all amounts received by the Corporation under section 21;
• (c) the amount advanced by the Reserve Bank under section 26;
• (d) all amounts transferred to that Fund from the General Fund or the
Credit Guarantee Fund under section 27; and
• (e) all income arising from the investments made out of that Fund.
Credit Guarantee Fund
• 23A.(1) To the Credit Guarantee Fund shall be credited, -
• (a) all amounts in the Reserve for unexpired Guarantee Risks maintained by the
Credit Guarantee Corporation of India Limited, a company formed and registered
under the Companies Act, 1956, and having its registered office at Mumbai;
• (b) all amounts received by the Corporation as fees for guarantees and
indemnities taken over or given by it;
• (c) all amounts received by the Corporation in respect of guarantees and
indemnities taken over or given by it;
• (d) all amounts transferred to that Fund from the Deposit Insurance Fund or the
General Fund under section 27; and
• (e) all income arising from the investments made out of that Fund
General Fund
• 24. All receipts of the Corporation other than those referred to in sub-
section (1) of section 23 or in sub-section (1) of section 23A shall be
credited to the General Fund and all payments by the Corporation
other than those referred to in subsection (2) of section 23, or, as the
case may be, sub-section (2) of section 23(A) shall be made out of
that Fund.
Investment
• 25. All moneys belonging to the Deposit Insurance Fund or the Credit
Guarantee Fund or the General Fund which may not for the time
being be required by the Corporation, shall be invested in promissory
notes, stock or securities of the Central Government and all other
moneys shall be deposited with Reserve Bank.
Advances by Reserve Bank
• 26. (1) The Reserve Bank shall, from time to time, advance to the
Corporation on a request by it such sum or sums as may be required
by the Corporation for the purposes of the Deposit Insurance Fund or
the Credit Guarantee Fund.
• Provided that the total amount outstanding at any one time on
account of such advances shall not exceed five crores of rupees.
Advances from General Fund to the Deposit
Insurance Fund or Credit Guarantee Fund
• 27. If, at any time, the amount available in the Deposit Insurance Fund
or the Credit Guarantee Fund is insufficient to meet the requirements
of that Fund, the Corporation may transfer, on such terms and for
such period as may be determined by the Board with the approval of
the Reserve. Bank, from any of the other two Funds, referred to in
section 22, such amount as may be necessary to meet the
requirements of the Deposit Insurance Fund or the Credit Guarantee
Fund, as the case may be
Preparation of balance sheet etc. by
Corporation
• 28. (1) The balance-sheet and accounts of the Corporation shall be
prepared and maintained in such form and manner as may be
prescribed.
Audit
• 29. (1) The affairs of the Corporation shall be audited by an auditor
duly qualified to act as an auditor under sub-section (1) of section 226
of the Companies Act, 2013, who shall be appointed by the Board
with the previous approval of the Reserve Bank and shall receive such
remuneration from the Corporation as the Reserve Bank may fix
Returns from insured banks
• the Corporation may at any time direct an insured bank or a credit
institution to furnish to it, within such time as may be specified by the
Corporation, such statements and information relating to the deposits
in that bank or the credit facilities granted.
Corporation to have access to records
• 35. (1) The Corporation shall have free access to all such records of an
insured bank or a credit institution, perusal whereof may appear to
the Corporation to be necessary for the discharge of its functions
under this Act
Inspection of insured banks by Reserve Bank
• 36. (1) The Corporation may, for any of the purposes of this Act,
request the Reserve Bank to cause an inspection of the books and
accounts or an investigation of the affairs of an insured bank or a
credit institution to be made and on such request the Reserve Bank
shall cause such inspection or investigation to be made by one or
more of its officers, or through such other person or agency as the
Reserve Bank may determine.
Corporation to furnish information to Reserve
Bank
• 37. The Corporation shall, on a request in writing from the Reserve
Bank, furnish to it within such time as may be specified by the
Reserve Bank, such statements and information relating to the
business or affairs of the Corporation or of an insured bank as the
Reserve Bank may consider necessary or expedient.
Liquidation of Corporation
• 44. (1) The Corporation shall not be placed in liquidation save by order of
the Central Government and in such manner as the Government may direct.
• (2) On the liquidation of the Corporation
• (a) the outstanding assets of the Corporation in so far as they relate to the
Deposit Insurance Fund shall be distributed among the insured banks in
such manner and in such proportion as may be determined by the Central
Government having regard to the amounts of premium paid by them during
any prescribed period or the deposits of the said banks as on the date of
liquidation of the Corporation or other relevant circumstances;
• (b) the remaining outstanding assets of the Corporation shall be transferred
to the Reserve Bank.
Power of Central Government to give
directions
• 45. In the discharge of its functions under this Act, the Corporation
shall be guided by such directions in matters of policy involving public
interest as the Central Government may after consulting the Reserve
Bank give to it in writing
Dispute as to amount of premium
• 46. Any dispute as to the amount of premium due from any insured
bank shall be decided by the Central Government and the decision of
that Government shall be final.