DICGC to double premium

Deposit Insurance Credit Guarantee Corporation (DICGC) has decided to double the deposit insurance premium to 10 paise per Rs 100 per annum of assessable deposits over a two-year period.

This decision is a fallout of the corporation having had to settle claims for a few hundred crore rupees in the last three years due to the failure of banks, particularly in the co-operative sector. The payouts have caused a severe drain on the Corporation's Deposit Insurance Fund (DIF).

In the first phase the premium will be raised to eight paise per Rs 100 of assessable deposits from the financial year 2004-05 and 10 paise per Rs 100 of assessable deposits from the financial year 2005-06.

Thus the premium of 8 paise will be payable for the half years beginning April and October 2004 and the premium of 10 paise will be payable from the half year beginning April 2005 onwards.

The corporation will continuously review the DIF and will consider revising the premium further from time to time with the objective of maintaining a strong DIF.

It is felt that while there is sufficient corpus in DIF for the present, it is necessary to build up a sound DIF in the long term to protect the interests of the banking system.

As per the DICGC Act, each depositor in a insured bank is insured up to a maximum of Rs 1 Lakh for both principal and interest amount held by him in the same right and capacity as on the date of liquidation/cancellation of bank's licence or the date on which the scheme of amalgamation/merger/reconstruction comes into force.