Di & Cgc

While banks have had several complaints regarding the conduct of the scheme, providing cover for priority sector advances made by the banks has also not been a profitable proposition for DI&CGC.

If the credit guarantee schemes are wound up, then the existence of a separate institution, just for providing deposit insurance, does not make sense. In any case, the officials manning the DI&CGC are on deputation from the RBI. But then there could be a case for retaining the corporation even if the credit guarantee schemes are scrapped.

Does it not make logical sense for banks to pay insurance premium according to their financial strengths? Why should the SBI pay the same insurance premium on both its deposits as well as its priority sector advances, as, say, Indian Bank? Are not the risks much higher for Indian Bank? Let the DI&CGC work in tandem with DBOD and examine the possibility of classifying banks according to their strengths and charge a differential premium. That would also act as an incentive to banks to improve their position.