Deposit Insurance: For 19 Years, DICGC Never Even Asked for Inspection or Records from Any Insured Bank, Credit Institution
In over 19 years of its existence, the Deposit Insurance and Credit Guarantee Corp (DICGC) has never ever asked for inspection of any bank or financial institution insured with it, despite the fact that cooperative banks seem to fail at the rate of about one every month. 
 
The DICGC revealed this in response to a Right to Information (RTI) Act. This means that DICGC has made no attempt to respond to red-flags about banks under stress and the processes they adopt, as is permitted under its regulations. 
 
Section 35 & Section 36 of the DICGC Act, which interalia says the DICGC is empowered to have free access to the records of all insured banks and call for copies of all such records and the DICGC can request the RBI to cause inspection of the books and accounts or investigation of the affairs of the insured bank or credit institution. 
 
DICGC collects insurance at the rate of 0.10 paise on their overall deposits, although only Rs1  lakh per depositor is covered under its insurance. This practice itself has been questioned by the All India Bank Employees Association (AIBEA) in a recent letter to the finance minister.
 
We had asked for copies of the communication that DICGC sent to Reserve Bank of India (RBI) for inspection of insured banks or credit institutions, between April 2000 to October 2019. 
 
Responding to it, the Corporation says, "DICGC has not sent any request for inspection of insured banks or credit institutions to RBI."
 
 

This was in response to a query asking DICGC to share the names of insured banks or credit institutions, who were asked by DICGC to furnish records under Section 35 of the DICGC Act during April 2000 to October 2019. 

 
"DICGC has not asked for any records of insured banks or credit institution under Section 35 of the DICGC Act during April 2000 to October 2019," it says in the reply.
 
 
As on 31 March 2019, the deposit insurance fund at DICGC is Rs97,350 crore, including a surplus of Rs87,890 crore. The claims settled by DICGC so far since 1962 are only Rs5,120 crore and that too for the cooperative banks.
 
Out of 2,098 banks covered by the DICGC, 1,941 banks are cooperative banks. Only these banks are facing problems of closure and liquidation and the deposits of these banks need to be covered by DICGC.
 
In FY18-19, commercial banks, including public sector banks (PSBs), paid a deposit insurance of Rs11,190 crore while cooperative banks paid Rs850 crore, taking the total premium paid to DICGC at Rs12,040 crore. During the same year, DICGC received claims worth Rs37 crore from cooperative banks. However, none of the claims was settled. 
 
Across the country, all cooperative banks have deposits worth Rs8.49 lakh crore, out of which only deposits worth Rs3.77 lakh crore or 44% of the total deposits are covered under the DICGC scheme. At the same time, 19 PSBs have total deposits worth Rs72 lakh crore, out of which just 30% or Rs22 lakh crore, are covered under the deposit insurance scheme. 
 
After the collapse of Palai Central Bank Ltd and Laxmi Bank Ltd, in 1960, the government introduced the Deposit Insurance Corporation Bill, 1961. The Bill was approved by the Parliament in December 1961. Accordingly, the Deposit Insurance Corporation Act came into being with effect from 1 January 1962.
 
Earlier, only commercial banks were covered by the Act. Later, cooperative banks, regional rural banks, primary agricultural societies were also brought under the coverage of deposit insurance.
 
However, over the years, only cooperative banks were found failing regularly due to dual regulation. The banking operations of cooperative banks (or rather credit societies) is governed by RBI, while overall functioning falls under the regulation of registrar of cooperative societies. Unfortunately, records show, neither RBI nor registrar of cooperative societies is able to fully regulate or control cooperative banks.  
 
To begin with, the insurance cover against bank deposits was up to Rs1,500. In 1968, it was enhanced to Rs5,000, in 1970 to Rs10,000, in 1976 to Rs20,000, in 1980 to Rs30,000 and, in 1993, the cover was enhanced to Rs1 lakh, which continues till today.
 
Similarly, in the beginning, premium payable for the deposit insurance was at 0.05 paise per Rs100 per year. In 1971, it was revised to 0.04 paise. Later in 1963, it was increased to 0.05 paise, 0.08 paise in 2004 and to 0.10 paise in 2005.
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    COMMENTS

    P M Ravindran

    2 months ago

    A very useful report with a lot of information that exposes the fallacy that ours is a society that is ruled by law. I can see the whole of judicial fraternity is up in arms against the encounter killings in the Hydrabad rape and murder case. Until and unless the judiciary owns up its failures and take corrective measures there cannot be any hope for law abiding citizens in this country. We have to, unfortunately , absolve the elected organ of our Constitution because we have seen how 5 odd judges sitting in an air conditioned room trashed the National Judicial Appointment Commission Act, duly enacted by the competent authority following the due process as prescribed for such enactment. The fact remains that this law itself was necessitated because the appointment and transfer of judges had certainly been with the Executive till the 1990s when the judiciary usurped this power when weak governments were in power at the Center. There is no system like the collegium mentioned in our Constitution or practiced anywhere in the world.

    Hudaf Shaikh

    3 months ago

    Shocking lapses on part of RBI and it's agencies -

    Sreenath

    3 months ago

    Why can't the banks offer a higher insurance on their own ? Perhaps at a small and reasonable price. Something like the secured deposits offered by companies.
    Why do they have to wait for the DICGC ?

    Bipin Kochar

    3 months ago

    Prima facie as the insurance amount collected is at least 10 times payout, the DIGCG can easily provide a cover of 10 times the current insured amount without increasing the premia - i.e. the insured limit can be immediately revised to at least Rs 10 lacs without raising premia.

    Furthermore, since payouts seem to be mostly being made against cooperative bank failures, DIGCG should raise the premia for these set of banks and use the additional funds to inspect their books.

    Ashok M Shah

    3 months ago

    Govt may use surplus of more then Rs.80000 cr to adjust financial budget as this in increasing since last more then 50yrs.

    Shravan Shah

    3 months ago

    1. Those in power have not thought about DICGC limit enhancement even after an incident such as Madhavpura mercantile coop bank.
    2. Requesting you to upload the entire RTI reply.

    m.prabhu.shankar

    3 months ago

    In a free market economy regulators are the key. Need to make all regulators submit a report in public every quarter.

    Sandeep More

    3 months ago

    I've always been of the opinion that Govt servants work only the bare minimum and shirk away the rest. More importantly, they refrain from taking decisions too. It also helps that they are unaccountable and cannot be punished for their misdeeds

    REPLY

    P M Ravindran

    In Reply to Sandeep More 2 months ago

    That government servants cannot be punished for their misdeeds is a misconception. If even Sections 217, 218 and 219 of the IPC is invoked I can say that not more than 10 percent of the public servants will be serving now. When it comes to information commissioners not only most, if not all, would be spending the rest of their lives behind bars but, if it was possible, they would continue there for their next nine lives.

    Nagaraju Bommanahalli

    3 months ago

    90% Indian s doesn't know only one lakhs insured by all banks and also most of the people think bank are honest,I will ask both both parties please reply ,how much money recovered till today by selling assets of fraud persons who taken huge fraud loans,how much money returned to the bankrupted bank account holders , don't do drama,my friend lost several lakhs from Alpic finance a NBFC in twenty five years back, but till today he have not received single paise , this Alpic finance company is a subsidiary of Cipla group, this NBFC done huge fraud,but till today no action taken, these companies go to court and take stay order for the sale of theirs assets, Court will drag the case to twenty to thirty years at that time all investers will die, these fraudessters enjoy our loot money with political leaders, these are all drama nothing will happen only poor will die , why not Auditors arrested who have been submitting manuplated Audit reports by fabricating balance sheets. Even concerned officials from RBI are also equally liable for this situation. We need to initiate proper legal steps to compel RBI to immediately resume normal operations of Bank.In past history no business man who had taken huge fraud loans are not punished by court,ask these RBI give the list of who had punishment for such crime in India, nothing only poor people are finished from these fruduster, former finance minister chidambaram who had made banks to give loans by phone calls is getting bail after bail from all courts ,his son has thousand crores money in foreign country, these money has gave by Vijay malya like business men for getting fraud loans,no hope for our India , UPA gave 70%fraud loans , NDA has gave 30%fraud loans,one is 840and another is420, this is only difference, both parties taking India to bankruptcy,no hope for common people
    In India nobody knows how Indian companies are doing fraud from the beginning to last ,for example a big business men will start the company in India as below .His companies actual value is Rs2000crores but with the help of the auditors,Banks,and chartered accountants he made his company s values to RS 6000 crores by book adjustment with bribe and he call IPO that is in share market and collect Rs10000 crores in share market, first he pumped 60%of money to foreign country in the name of business and will deposit most of the money in his name next he will file bankruptcy due to losses and will write off all the loans this is the business doing in India ED is doing drama ICICI Bank chandakochar is well known to all she done huge fraud in ICICI Bank, this drama of enquire is doing from past one year, but still she is not arrested, reasons In this icici bank scam all SEBI auditors ED RBI central government rating agencies big leaders of all parties involved.central government making all efforts to avoid arrest these fellows,if arrested all all foreign country become knows most of the Indian companies running on bogus and take away all foreign investment,then India become bankruptcy.This is well known by central government hence avoiding all efforts to arrest directors of icici bank chandakochar DHFL jetairways Videocon kingfisher airline PNB bank head [email protected] etc .even Vijaymalya kingfisher airline companies don't have single plane in his companies name but all banks gave Rs10000 crores money, same type loans gave to jet airways,DLF, Devan housing finance company,[email protected],fs,etc wait in few months most of the common people investment in icici bank NBFC PSU banks equity NCD mutul funds become Zero,All parties RBI officers, SEBI, etc are corrupt they are taking India towards bankruptcy.

    REPLY

    P M Ravindran

    In Reply to Nagaraju Bommanahalli 2 months ago

    I can personally vouch for the fraud being perpetrated by NBFCs on their depositors. The credit rating agencies are the bigger frauds. Many of the NBFCs use the brand name of parent companies to attract depositors and when they fail only will the depositors realise that the parent company is not even a distant relation. Lloyds Finance, DCM Finance, Nagarjuna Finance , Ceat Fianance are some examples. The Complany Law Boards , like all other quasi judicial organisations, is also just a rehab center for the blue eyed boys of the appointing authorities. Ultimately the responsibility for such gross violations of law and norms by anybody who is somebody rests with the judiciary.

    Nagaraju Bommanahalli

    In Reply to P M Ravindran 2 months ago

    Yes sir all are doing fraud on our money

    Aditya G

    3 months ago

    Since when did the bureaucrats have the desire to re-impose more work upon themselves? They won't. It's their culture to slack around in their cubicle and swipe left on Tinder the whole day.

    Perhaps, the Govt ought to pass an amendment by rewording the DICGC Act to make inspections mandatory (more manpower needed, more jobs, ahoy!). It's as though the word 'empowered' has been reduced to a four letter word. Without strong leadership, nothing will happen.

    After Twitter backlash HDFC Bank 'regrets' glitch
    As HDFC Bank customers stormed Twitter with complaints that its online banking site and the app were not operational or working properly, the bank on Tuesday said it regretted the inconvenience to customers, and its experts were on the job to resolve the glitch.
     
    "We apologise that the resolution of the technical glitch is taking more time than anticipated. Our experts are working round the clock. While some customers are able to transact using NetBanking and MobileBanking app, a few may still be facing intermittent issues," tweeted the 'HDFC Bank Cares'. 
     
    "Needless to say this is not the experience we would like our customers to have and we sincerely regret the inconvenience," said another tweet.
     
    Customers have faced issues while transacting and using the site and the mobile app since Monday and have vented their anguish on social media.
     
    One Chandrakant Kumar tweeted: "More HDFC netbanking getting worst for a couple of days. Unable to do anything online. Fund transfer also not working."
     
    Another person with the tweeter handle @abhiman55197755 wrote: "More I am still facing same problem with net banking please fix it #hdfcbankdown #hdfc bank care."
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    Shantanu Ambedkar

    3 months ago

    This is a real cause of concern particularly in this day and age when most banking and investment related transactions are done online. The message on the site blamed a very high level of customer activity for the site being inaccessible. That’s irresponsible on many levels. It could have implied some problem at the bank and therefore customers rushing to withdraw money. Admission of their own technical problems would be a fair and responsible response. The fact is that HDFC Bank, once a bank with the best online and tech systems has been incapable of handling scale and growth and has underinvested in tech. Also, it has made customer processes needlessly complicated out of a sense of arrogance and hubris. They had one major incident a few months ago but clearly the management either does not seem to have learnt it’s lessons or worse don’t care. Their moniker of the best bank in India has made them insulated from having to consider their customers. Also, their intense focus on quarterly earnings and targets means that there is no focus on other stakeholders, most importantly customers. Not that their shares have outperformed the other banks in the recent past. That should atleast teach them a lesson?!

    Nakul Kumar Reddy

    3 months ago

    HDFC bank commercial to the core,they want only money, nothing else they don't need anything.

    Deepak Narain

    3 months ago

    This Bank is a big disappointment. Their operatives are either moron or deliberately act so. We have been suffering at their hands for the last many months with no results. You may ask them anything and they continue to write the same irrelevant nonsense causing lots of frustration. All their levels of appeal are unresponsive and useless.

    P S SHANKAR

    3 months ago

    The HDFC Bank website is not accessible for NRIs too, for the past few days. This incident shows the callous nature of customer care of HDFC Bank and the fragility of its IT systems.

    NCLT admits RBI's plea for insolvency against DHFL
    The National Company Law Tribunal's (NCLT) Mumbai bench on Monday admitted the RBI's application for the initiation of insolvency proceedings against the cash-strapped Dewan Housing Finance Corporation Ltd (DHFL).
     
    The Reserve Bank of India had on Friday filed an application in the NCLT bench for initiation of the corporate insolvency resolution process. In a statement, the central bank had said that there would be a debt moratorium on DHFL as long as the insolvency process is on.
     
    The apex bank filed the application for initiation of corporate insolvency resolution process against DHFL under several clauses of Section 227 and Section 239 of the Insolvency and Bankruptcy Code, 2016 along with provisions under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers) Rules, according to the statement.
     
    The RBI appointed a committee to advise the administrator of the private sector lender after superseding the company's board of directors and appointing R. Subramaniakumar as its administrator on November 20.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    COMMENTS

    naran Patel

    3 months ago

    Really I appreciated your quick actions. Thanks.

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