Salient Features of Deposit Insurance
(i) The scheme of deposit insurance applies since its inception to all commercial banks in India, scheduled
and non-scheduled. The de- posit insurance cover has been extended to co-operative banks also in 21
States and 3 Union Territories. The Regional Rural Banks have also been included in this scheme. All
these banks are called insured banks.
(ii) The insurance cover is extended to all deposits with the insured banks except the deposits of the Central
and State Governments, foreign Governments and the commercial banks.
(iii) The deposits with the insured banks are insured up to a special limit only. The insurance cover is available
in respect of all unpaid balances due to a depositor held in a bank in the same capacity and in the same
right up to ` 1 lakh. This means that every account of a depositor in every insured bank is insured to the
extent of ` 1 lakh. The accounts with credit balance up to ` 1 lakh each are called fully protected accounts.
(iv) The Corporation reimburses the depositors in case the insured bank fails or is amalgamated with another
bank and defaults in paying fully the balances due to the depositors in cash or by crediting the same to
the full extent in the books of the transferee banks. The difference between the amount so paid or
credited and the limit of insurance cover per account is paid by the Corporation. For example, if bank X,
on its merger with bank Y, gives a credit equal to 75% of the deposit, a depositor having a credit balance
of ` 10,000 will get credit of ` 7,500. The balance of ` 2,500 will be reimbursed to him by the Corporation.
(v) The rate of insurance premium is 5 paise per annum for every hundred rupees of assessable deposits.
It is payable by the insured banks and not by the depositors at half-yearly intervals. Assessable deposits
are those deposits to which the cover of insurance is ex- tended under (ii) above. Premium is thus
payable on total assessable deposits whereas the ‘insured deposits’ are those which are below the limit
of insurance cover, i.e., ` 1 lakh in each account.
(vi) The Corporation maintains two funds :
(a) Deposit Insurance Fund, and
(b) General Fund.
The income from insurance premia is credited to the Deposit Insurance Fund and is invested in the Central Government securities. Income from such investments is credited to and the insurance losses are debited to the
Revenue Account of the Fund. The General Fund meets all other expenses of the Corporation.