PSU lenders paid 10% more insurance premium to deposit guarantor DICGC in FY25

Deposit insurance

In line with Centre’s plan to increase insurance cover of bank deposits, state-owned lenders saw a 10 percent rise in premium paid to Deposit Insurance and Credit Guarantee Corporation (DICGC) during the financial year 2024-25, data has shown.

Nine state-owned banks paid Rs 13,292.97 crore as deposit insurance in FY25 compared to Rs 12108.81 crore in FY24, according to the Moneycontrol’s analysis of annual report showed.

The banks analysed include State Bank of India, Punjab National Bank, Bank of Baroda, Indian Overseas Bank, Indian Bank, Canara Bank, Bank of Maharashtra, Bank of India and UCO Bank.

Largest lender State Bank of India paid Rs 5,415.67 crore in FY25 as DICGC insurance premium compared to Rs 4,899.79 crore in FY24. Punjab National Bank paid Rs 1,871.34 crore in FY25 as compared to Rs 1,736.45 crore in FY24. Canara Bank paid Rs 1696.22 crore in FY25 as compared to Rs 1525.85 crore in FY24.

The DICGC - a subsidiary of the RBI - was established to safeguard depositors in the event of a bank's failure. This organisation insures deposits across all banks, offering depositors the security of recovering their funds up to a specified limit, should their bank become insolvent or face financial distress. The Deposit Insurance and Credit Guarantee Corporation (DICGC) charges a premium to insure lender's deposits, and this premium collected is used to maintain the Deposit Insurance Fund (DIF) and provide insurance coverage to depositors.

Depositors from banks under stress can claim up to Rs 5 lakh from the DICGC, contingent upon their submission of willingness and subsequent verification, thereby providing a level of assurance for their savings.

The increase in bank deposit insurance cover paid by banks comes at a time when a cooperative lender - New India Co-operative Bank - has been facing regulatory action by RBI.

The Reserve Bank superseded the board of the cooperative lender and appointed an administrator, after unearthing a scam to the tune of Rs 122 crore that eventually led to police action against the General Manager and one accomplice, both of whom now under custody till Feb 21.

On February 19, Moneycontrol have reported that Centre is set to significantly raise insurance cover for bank deposits to Rs 8-12 lakh from current Rs 5 lakh.

M Nagaraju, Financial Services Secretary had during a post-budget interaction said that the government was considering increasing the limit on deposit insurance.