What is Deposit Insurance ?

• Integrity Education, Delhi
• 30, Jul 2021

Context: The Union Cabinet cleared changes to the deposit insurance laws to provide funds up to Rs 5 lakh to an account holder within 90 days in the event of a bank coming under the moratorium imposed by the RBI.

Present Process
Account holders had to wait for years till the liquidation or restructuring of a distressed lender to get their deposits that are insured against default. 

About Deposit Insurance

• A depositor has a claim to a maximum of Rs 5 lakh per account as insurance cover.
• The cover is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), which is a fully owned subsidiary of the Reserve Bank of India.
• Depositors having more than Rs 5 lakh in their account have no legal recourse to recover funds in case a bank collapses.
• The premium for this insurance is paid by banks to the DICGC