Deposit Insurance and Credit Guarantee Corporation (DICGC)

• What are the various subsidiaries of RBI and what functions do they perform?

 

The Reserve Bank of India (RBI) has several subsidiaries, each with its specific functions and responsibilities. Below are brief descriptions of its subsidiaries:

Deposit Insurance and Credit Guarantee Corporation (DICGC):

DICGC is a wholly-owned subsidiary of the Reserve Bank of India (RBI). It was established in 1978 under the Deposit Insurance and Credit Guarantee Corporation Act.

The primary objective of DICGC is to protect depositors in case of a bank failure. It does so by providing deposit insurance to all banks that are covered under the Deposit Insurance Scheme.

Currently, all commercial banks, cooperative banks, and regional rural banks are covered under this scheme. DICGC provides insurance coverage up to Rs. 5 lakhs per depositor per bank, which includes both principal and interest amounts.

This coverage applies to all types of deposits, such as savings accounts, current accounts, fixed deposits, and recurring deposits.

DICGC collects a premium from banks that are covered under the Deposit Insurance Scheme. The premium is calculated based on the amount of deposits held by the bank and the risk involved.

DICGC also supervises and regulates the functioning of cooperative banks and regional rural banks to ensure their safety and soundness. It conducts regular inspections of these banks and takes corrective actions if required.

In case of a bank failure, DICGC takes over the management of the bank and pays compensation to depositors as per the insurance coverage limit.

DICGC’s objective is to promote public confidence in the banking system by protecting depositors from the loss of their hard-earned money due to bank failures.

DICGC also plays an important role in promoting financial inclusion by providing a safety net for small depositors. This encourages them to save their money in banks and other financial institutions.

In summary, DICGC is an important subsidiary of RBI that plays a critical role in protecting depositors in case of bank failures. Its deposit insurance scheme provides a safety net for small depositors and promotes public confidence in the banking system.