Bank Deposit Insurance in India: DICGC Cover Debate
Why in the news
Another rise in deposit insurance is being debated, with analysts also flagging side effects.
Key facts
- Run by DICGC, a subsidiary of RBI; cap ₹5 lakh per depositor per bank (2020).
- Value coverage fell from 50% (2020-21) to 43% (2023-24); the top 2% of depositors own 57% of deposits.
- Peers cover more: Brazil about ₹42 lakh equivalent, Russia about ₹12 lakh.
| Year | Trigger | Cap change |
|---|---|---|
| 1993 | Bank of Karad failure | ₹30,000 to ₹1 lakh |
| 2020 | PMC Bank crisis | ₹1 lakh to ₹5 lakh |
Why a hike is debated
- Competition from mutual funds and equities; deposit share of household savings up from 28% to 41% (2021-24); failures like New India Co-operative Bank.
Concerns and way forward
- Moral hazard: lax depositor diligence and riskier bank lending.
- Build a calibrated framework for retail and large depositors, shifting from crisis response to risk prevention.