DICGC exceeds global average with month-long depositor payout: Patra

The Deposit Insurance and Credit Guarantee Corporation of India (DICGC) takes nearly 30 days on average to reimburse insured depositors, compared to the global average of 14 days, according to Reserve Bank of India (RBI) Deputy Governor Michael Debabrata Patra.

This delay in reimbursement in India is primarily due to data quality issues, challenges in identifying insured depositors, and the lack of alternative bank accounts for depositors.

“The global average period for reimbursing depositors has reduced from 28 to 14 days. Currently, DICGC’s reimbursement takes about a month on average. Factors typically impeding faster reimbursement include data quality issues, identifying insured depositors, and depositors lacking an alternative bank account,” Patra said during his speech at the International Association of Deposit Insurers (IADI) conference in Rome, Italy, on June 14. The RBI uploaded the speech on its website on Tuesday.

In India, deposit insurance is mandatory for all banks, including foreign banks. As of now, 1,997 banks are covered, which includes 140 commercial banks and 1,857 co-operative banks.

According to the latest survey by IADI on deposit insurance, India has the largest number of deposit-taking institutions covered by deposit insurance worldwide, second only to the US. The current insurance coverage limit in the country is ~5 lakh per depositor per bank.

Contrary to the growing global practice of nearly half of deposit insurers levying differential premiums that incorporate additional risk measures — a practice that has increased from 30% in 2010 — India levies a flat rate premium of 0.12 per cent per annum. This rate has been periodically revised to ensure the adequacy of the DICGC’s deposit insurance funds.

The size of the DICGC's fund stands at 2.02 per cent, measured by its ratio to insured deposits. The corporation aims to achieve a ratio of 2.5 per cent by March 2028.

“Looking ahead, increased uncertainty is likely to pose greater challenges to the functioning of deposit insurers,” Patra remarked, noting that climate change is emerging as a key risk.

“The DICGC is exploring appropriate coverage for green deposits, climate risk-based differential premiums, and ex-ante funding needs for climate sustainability, as these challenges will inevitably require effective coordination and information sharing between deposit insurers and other national safety net participants, as well as with those in other jurisdictions,” he added.