{"id":12268,"date":"2021-07-29T00:00:00","date_gmt":"2021-07-29T00:00:00","guid":{"rendered":"https:\/\/www.nextias.com\/current_affairs\/uncategorized\/29-07-2021\/deposit-insurance-and-credit-guarantee-corporation-dicgc-bill-2021\/"},"modified":"2021-07-29T00:00:00","modified_gmt":"2021-07-29T00:00:00","slug":"deposit-insurance-and-credit-guarantee-corporation-dicgc-bill-2021","status":"publish","type":"post","link":"https:\/\/www.nextias.com\/ca\/current-affairs\/29-07-2021\/deposit-insurance-and-credit-guarantee-corporation-dicgc-bill-2021","title":{"rendered":"Deposit Insurance and Credit Guarantee Corporation (DICGC) Bill, 2021"},"content":{"rendered":"<p style=\"text-align:justify\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>In News<\/u><\/strong><\/span><\/span><\/span><\/p>\n<p style=\"text-align:justify\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Recently, the Cabinet approved the Deposit Insurance and Credit Guarantee Corporation Bill, 2021.\u00a0<\/span><\/span><\/span><\/p>\n<p style=\"text-align:justify\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>About<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The move came after Punjab and Maharashtra Co-operative (PMC) Bank faced a grave fraud.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Subsequently, Yes Bank and Lakshmi Vilas Bank, too, came under stress, leading to their restructuring.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">In a relief to depositors of stressed banks, the Cabinet cleared amendments to the Deposit Insurance Credit Guarantee Corporation (DICGC) Act, which will enable customers to have access to their deposits up to Rs 5 lakh within just 90 days, if their banks go bust and are placed under moratorium.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p>\u00a0<\/p>\n<p style=\"text-align:center\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><img decoding=\"async\" src=\"https:\/\/lh3.googleusercontent.com\/3PJhgIxLK_u2sYthhW4fMS3IfhB1TRggA5lTyHraGZfbBLD2ubBTMYFgCYFSzz9Y92kZJ9qNwKqSAu-aPUvUswyUlJdMg3UmLill-4us22fEPA5hHbMrMO02jR_URiUUlUbhN4-1\" style=\"height:354px; width:460px\" \/><\/span><\/span><\/span><\/p>\n<p style=\"text-align:center\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">(Image Courtesy : <\/span><\/span><\/span><a href=\"https:\/\/www.hindustantimes.com\/business\/rs-5l-insurance-for-stressed-bank-depositors-in-90-days-101627511838938.html\" style=\"text-decoration:none\" target=\"_blank\" rel=\"noopener\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#1155cc\"><u>HT<\/u><\/span><\/span><\/span><\/a><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">)<\/span><\/span><\/span><\/p>\n<p>\u00a0<\/p>\n<p style=\"text-align:justify\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>Key Points<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Expedited Liquidation: <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Earlier, 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. It is now proposed to be done in 90 days.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Increasing Deposit Insurance Premium: <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">It permits raising the deposit insurance premium by 20% immediately, and maximum by 50%.\u00a0<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The premium is paid by banks to the DICGC. The Insured banks pay advance insurance premiums to the corporation semi-annually within two months from the beginning of each financial half year, based on their deposits as at the end of previous half year.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Banks currently pay a minimum of 10 paise on every Rs 100 worth deposits to the DICGC as premium for the insurance cover, which is now being raised to a minimum of 12 paise.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Deposit Value Coverage: <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The Rs 5-lakh deposit insurance cover, which was last year raised from Rs 1 lakh, will address 98.3 per cent of all deposit accounts by number, and 50.9 percent of deposits by value<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Globally, deposit insurance coverage is only 80 per cent globally and it covers only 20-30 percent of deposit value,<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>New and Old Banks Inclusion: <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">It will cover banks already under moratorium and those that could come under moratorium.\u00a0<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Within the first 45 days of the bank being put under moratorium, the DICGC would collect all information relating to deposit accounts.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">In the next 45 days, it will review the information and repay depositors within a maximum of 90 days.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Small LLP Definition Expanded: <\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Such entities with contributions (from partners) up to Rs 5 crore and annual turnover up to Rs 50 crore will be categorised as small LLPs; earlier, these limits were set at Rs 25 lakh and Rs 40 lakh, respectively.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p style=\"text-align:justify\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>Deposit Insurance and Credit Guarantee Corporation<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">It was established in 1978 after the merger of Deposit Insurance Corporation (DIC) and Credit Guarantee Corporation of India Ltd. (CGCI) after passing of the <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Deposit Insurance and Credit Guarantee Corporation Act, 1961<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> by the Parliament.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">It is a <\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>wholly-owned arm of the Reserve Bank of India (RBI)<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">, which offers deposit insurance.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">It insures deposit accounts, such as savings, current, recurring, and fixed deposits up to a limit of Rs 5 lakh per account holder of a bank.\u00a0<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">If a customer\u2019s deposit amount crosses Rs 5 lakh in a single bank, only up to Rs 5 lakh, including the principal and interest, will be paid by the DICGC if the bank turns bankrupt.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Coverage:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> Deposits in public and private sector banks, local area banks, small finance banks, regional rural banks, cooperative banks, Indian branches of foreign banks and payments banks are all insured by the DICGC.\u00a0<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Funds:<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"> The Corporation maintains the following funds :<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Deposit Insurance Fund<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">Credit Guarantee Fund<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:circle\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">General Fund<\/span><\/span><\/span>\n<ul>\n<li style=\"list-style-type:square\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The first two are funded respectively by the insurance premia and guarantee fees received and are utilised for settlement of the respective claims.<\/span><\/span><\/span><\/li>\n<li style=\"list-style-type:square\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">The General Fund is utilised for meeting the establishment and administrative expenses of the Corporation.<\/span><\/span><\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p style=\"text-align:justify\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong><u>Conclusion<\/u><\/strong><\/span><\/span><\/span><\/p>\n<ul>\n<li style=\"list-style-type:disc\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">In order to keep the faith of the public in the banking system and to further motivate them to deposit their money in banks, it was very important for the Central Government to give some insurance on deposits if the bank fails in the future.<\/span><\/span><\/span><\/li>\n<\/ul>\n<p><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\"><strong>Source<\/strong><\/span><\/span><\/span><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#000000\">: <\/span><\/span><\/span><a href=\"https:\/\/indianexpress.com\/article\/business\/banking-and-finance\/cabinet-decisions-july-28-key-announcements-amendment-to-dicgc-act-deposit-insurance-credit-guarantee-corporation-nirmala-sitharaman-7426837\/\" style=\"text-decoration:none\" target=\"_blank\" rel=\"noopener\"><span style=\"font-size:11pt\"><span style=\"font-family:'Book Antiqua',serif\"><span style=\"color:#1155cc\"><u>IE<\/u><\/span><\/span><\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In News Recently, the Cabinet approved the Deposit Insurance and Credit Guarantee Corporation Bill, 2021.\u00a0 About The move came after Punjab and Maharashtra Co-operative (PMC) Bank faced a grave fraud.\u00a0 Subsequently, Yes Bank and Lakshmi Vilas Bank, too, came under stress, leading to their restructuring. In a relief to depositors of stressed banks, the Cabinet [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":12269,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[21],"tags":[26,46],"class_list":["post-12268","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-current-affairs","tag-gs-3","tag-indian-economy-related-issues"],"acf":[],"jetpack_featured_media_url":"https:\/\/wp-images.nextias.com\/cdn-cgi\/image\/format=auto\/ca\/uploads\/2023\/07\/1411751current-affairs.jpg","_links":{"self":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/12268","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/comments?post=12268"}],"version-history":[{"count":0,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/posts\/12268\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media\/12269"}],"wp:attachment":[{"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/media?parent=12268"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/categories?post=12268"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.nextias.com\/ca\/wp-json\/wp\/v2\/tags?post=12268"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}