Deposit Insurance

by J B

After the financial crisis in Bengal in 1948, the concept of guaranteeing bank deposits attracted attention for the first time. The subject was brought up for reconsideration in 1949, but it was put on hold until the Reserve Bank made proper systems for bank inspections. Following that, the Rural Banking Inquiry Committee backed the notion in 1950. Following the collapse of the Palai Central Bank Ltd, the Reserve Bank and the Central Government gave serious consideration to deposit insurance.The Deposit Insurance Corporation (Amendment) Act of 1968 mandated that the Corporation register “qualified cooperative banks” as insured banks under the requirements of Section 13 A of the DICGC Act. In July 1960, the Government of India, in cooperation with the Reserve Bank, implemented a credit guarantee programme. Under Section 17 (11 A)(a) of the Reserve Bank of India Act, 1934, the Reserve Bank was entrusted with the administration of the scheme as an agent of the Central Government, and was designated as the Credit Guarantee Organization (CGO) for guaranteeing advances granted by banks and other credit institutions to small scale industries.The Credit Guarantee Corporation of India Ltd. introduced credit guarantee schemes to encourage commercial banks to meet the credit needs of previously undeserved sectors, particularly the weaker sections of society engaged in non-industrial activities, by providing guarantee cover to credit institutions’ loans and advances to small and needy borrowers. The above two companies (DIC & CGCI) were amalgamated in order to integrate the deposit insurance and credit guarantee functions, and the current Deposit Insurance and Credit Guarantee Corporation (DICGC) was formed.

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