Does deposit insurance coverage pay you straight for financial institution failure?

MUMBAI: Today, all industrial banks together with branches of overseas banks functioning in India, native space banks and regional rural banks are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). Moreover, in case you have deposits with multiple financial institution, the deposit insurance coverage protection restrict is utilized individually to the deposits in every financial institution.

However, within the case of liquidation, does deposit insurance coverage straight cope with the depositors of failed banks? In this piece, we check out when is deposit insurance coverage liable to pay the declare quantity and to whom.

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Normally, the deposit insurance coverage whereas registering the banks as insured banks present them with printed leaflets for show giving data referring to the safety afforded by the Corporation to the depositors of the insured banks. In case of doubt, you may make a particular enquiry of the department official whether or not your financial institution is insured by the DICGC.

You should additionally know that the deposit insurance coverage scheme is obligatory and no financial institution can withdraw from it. However, the DICGC could cancel the registration of an insured financial institution if it fails to pay the premium for 3 consecutive durations.

As per the deposit insurance coverage scheme, every depositor in a financial institution is insured as much as a most of ₹5 lakh for each principal and curiosity quantity held by him/her in the identical proper and similar capability as on the date of liquidation or the cancellation of financial institution’s licence or the date on which the banks get amalgamated or merged with one other financial institution.

So, if a financial institution goes into liquidation, the deposit insurance coverage is liable to pay to the liquidator or appointed officer the declare quantity of every depositor as much as ₹5 lakh inside two months from the date of receipt of the declare checklist from the appointed officer.

The appointed officer prepares a depositor clever declare checklist and sends it to the DICGC for scrutiny and fee. Once, the checklist will get scrutinized, the officer disburses the declare quantity to every insured depositor equivalent to their declare quantity. The official liquidators are typically appointed by the Central Government.

However, if a financial institution is reconstructed, amalgamated or merged with one other financial institution then the deposit insurance coverage pays the financial institution involved, the distinction between the total quantity of deposit or the restrict of insurance coverage cowl in drive on the time, whichever is much less and the quantity acquired by the involved financial institution underneath the reconstruction, amalgamation or merger scheme inside two months from the date of receipt of declare checklist from the transferee financial institution or, Chief Executive Officer of the insured financial institution.

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