DICGC settles claims worth Rs 195 cr from co-op banks

Mumbai, Sept. 2 The Deposit Insurance andCredit Guarantee Corporation (DICGC) has settled depositor claims aggregating Rs 195 crore from 28 liquidated co-operative banks, mainly from Karnataka and Maharashtra, in FY2009. This is against Rs 155 crore from 22 co-operative banks in FY2008.

The Corporation’s settlement figures highlight the fact that the number of co-operative banks whose licence has been cancelled by the banking regulator is steadily increasing. The regulator, in recent times, has come down heavily on some of these banks for mismanagement of operations, connected lending, failure to meet prudential norms and so on.

In the current financial year, so far, the Corporation has settled depositor claims aggregating Rs 68 crore from eight liquidated co-operative banks — four each from Maharashtra and Gujarat.

In FY2009, the single biggest settlement effected by DICGC was from the District Co-operative Bank Ltd, Gonda, Uttar Pradesh, for Rs 45.41 crore. Some of the other big settlements effected include Shree Balasaheb Satbhai Merchant Co-operative Bank Ltd, Copergaon, Maharashtra (Rs 22.93 crore) and the Maratha Co-operative Bank Ltd, Hubli, Karnataka (Rs 17.74 crore), and Parivartan Co-operative Bank Ltd, Mumbai (Rs 16.71 crore).

When a bank’s licence is cancelled by the Reserve Bank of India, the liquidator, who is appointed by the Registrar of Co-operative Societies, prepares a list of depositors holding deposits up to Rs 1 lakh and submits the same to the DICGC for settlement of claims.

All registered insured banks (commercial banks, including branches of foreign banks in India, regional rural banks, local area banks, and co-operative banks) are required to pay to the DICGC deposit insurance premium at the rate of 10 paise a year for every deposit of Rs 100 at half-yearly intervals. Governed by the DICGC Act, 1961, the corporation insures bank deposits such as savings, fixed, current, and recurring up to Rs 1 lakh a depositor/bank. The premium paid by the insured banks to DICGC is required to be absorbed by the banks themselves; for depositors, the benefit of this service is free of cost.

“Since DICGC is charging premium on all deposits, irrespective of whether the deposit is for Rs 100 or Rs 1 crore, there is no reason why deposit insurance coverage should be limited to a deposit holding of Rs 1 lakh. Depending on the gradation of a bank, the Corporation could consider introducing variable premium so that deposit insurance coverage could be upped substantially,” said Dr Vinayak Tarale, Secretary, Maharashtra State Co-operative Banks’ Association.

courtesy : The Business Line