DICGC takes one month to pay depositors higher than the global average

According to Reserve Bank of India (RBI) Deputy Governor Michael Debabrata Patra, the Deposit Insurance and Credit Guarantee Corporation of India (DICGC) takes an average of almost 30 days to repay insured depositors, compared to the global average of 14 days.

This delay in reimbursement in India is mainly due to data quality issues, difficulties in identifying insured depositors and the lack of alternative bank accounts for depositors.

“The global average term for repaying depositors has been reduced from 28 to 14 days. Currently, DICGC reimbursement takes approximately one month on average. Factors that typically hinder faster repayment include data quality issues, identifying insured depositors and depositors who do not have an alternative bank account,” Patra said while addressing the International Association of Deposit Insurers (IADI) conference in Rome , Italy, on June 14. posted the speech on its website on Tuesday.

In India, deposit insurance is mandatory for all banks, including foreign banks. Currently, 1,997 banks are covered, including 140 commercial banks and 1,857 cooperative banks.

According to the IADI’s latest survey on deposit insurance, India has the largest number of depository institutions covered by deposit insurance globally, after the US. The current insurance coverage limit in the country is ~5 lakh per depositor per bank.

Unlike the growing global practice of almost half of deposit insurers offering differentiated premiums that include additional risk measures – a practice that has increased from 30% in 2010 – India charges a fixed premium of 0.12 percent per year. This rate has been periodically reviewed to ensure the adequacy of the DICGC’s deposit insurance funds.

The size of the DICGC fund is 2.02 percent, measured by the ratio to insured deposits. The company aims for a ratio of 2.5 percent by March 2028.

“Looking ahead, increased uncertainty is likely to pose greater challenges to the functioning of deposit insurers,” Patra noted, noting that climate change is becoming a key risk.

“The DICGC is exploring appropriate coverage for green deposits, climate risk-based differentiated premiums and ex-ante financing needs for climate sustainability, as these challenges will inevitably require effective coordination and information sharing between deposit insurers and other national safety net participants. as well as with those in other jurisdictions,” he added.

First print: June 18, 2024 | 9:01 pm IST