When we open a bank deposit account, we assume that money deposited in the bank account is safe and will not have any issue in terms of getting the principal and interest back. This means that we assume that banks deposits are sound and safe.
By Vivek Sharma, Financial Planner and Trainer
When we open a bank deposit account, we assume that money deposited in the bank account is safe and will not have any issue in terms of getting the principal and interest back. This means that we assume that banks deposits are sound and safe. While the assumption is valid in case where banks have sound financials, we also need to know that if something goes wrong with the bank what happens to the deposit made by us. There are several examples of relatively large bank going bust in the past. Global Trust Bank was one such example. While it is a fact that if something goes wrong with a large bank, the government will step in to provide all support, it is important to understand inbuilt safety mechanism of the banking system.
Deposit Insurance and Credit Guarantee Corporation (DICGC) a wholly owned subsidiary of Reserve Bank of India (RBI) is the institution which has the responsibility of insuring deposits of customers made in banks. Deposits made by a customer in a bank upto Rs. 100000 is insured by DICGC provided the bank has availed deposit insurance from DICGC. As per DICGC,’ Each depositor in a bank is insured upto a maximum of Rs.1, 00,000 (Rupees One Lakh) for both principal and interest amount held by him in the same right and same capacity as on the date of liquidation/cancellation of bank's licence or the date on which the scheme of amalgamation/merger/reconstruction comes into force.’ As per DICGC, if an individual opens more than one deposit account in one or more branches of a bank for example, Mr. Ram opens one or more savings/current account and one or more fixed/recurring deposit accounts etc., all these are considered as accounts held in the same capacity and in the same right. Therefore, the balances in all these accounts are aggregated and insurance cover is available upto rupees one lakh in maximum’.
As of now 2199 banks in India have availed insurance coverage from DICGC. The list of banks insured can be checked at http://www.dicgc.org.in. It is important to understand that DICGC has been settling claims of insurance from time to time. In 2011-12 some of the claims settled by DICGC are as follows:
Name of the Bank
Date of payment
Amt (Rs. in Lakhs)
|1||Ichalkaranji Urban Co-op. Bank Ltd.,||Maharashtra||06-Apr-11||5530.09|
|2||Rabkavi Urban Co-operative Bank Ltd.||Karnataka||11-May-11||673.93|
|3||Vidharbha Urban Co-op. Bank Ltd.||Maharashtra||23-May-11||1595.37|
|4||Anyonya Co-op. Bank Ltd.||Gujarat||15-Jun-11||5778.96|
|5||Samata Sahakari Bank Ltd.||Maharashtra||17-Jun-11||4037.22|
No claim is paid directly to the customer by DICGC. The claims are paid only to the liquidator or bank in cases a bank is reconstructed or amalgamated / merged with another bank. DICGC process of claims settlement is as follows ,’ If a bank goes into liquidation: The DICGC is liable to pay to each depositor through the liquidator, the amount of his deposit upto Rupees one lakh within two months from the date of receipt of claim list from the liquidator. If a bank is reconstructed or amalgamated / merged with another bank: The DICGC pays the bank concerned, the difference between the full amount of deposit or the limit of insurance cover in force at the time, whichever is less and the amount received by him under the reconstruction / amalgamation scheme within two months from the date of receipt of claim list from the transferee bank / Chief Executive Officer of the insured bank/transferee bank as the case may be’.
There is no harm in checking the fact whether your bank is insured with DICGC when you open account especially if it is co-operative bank.The Great Diwali Discount!Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
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