Reimbursement by Deposit Insurance and Credit Guarantee Corporation of India (DICGC) to insured depositors takes nearly 30 days on average compared to the global average of 14 days, said Reserve Bank of India (RBI) Deputy Governor M D Patra.

This delay in reimbursement in India is mainly due to data quality issues, the identification of insured depositors, and depositors lacking an alternative bank account.

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

In India, deposit insurance is mandatory for all banks, including foreign banks. Currently, 1,997 banks are covered, which include 140 commercial banks and 1,857 cooperative banks. According to the latest survey by IADI on deposit insurance, India has the largest number of deposit-taking institutions covered by deposit insurance in the world, after the US. The current insurance coverage limit in the country is Rs 500,000 per depositor in a bank.

Unlike the growing practice worldwide of nearly half of deposit insurers levying differential premiums incorporating additional risk measures – up from 30 per cent in 2010 – a flat rate premium of 0.12 per cent per annum is levied in India, which has been revised from time to time, keeping in view the adequacy of the DICGC’s deposit insurance funds.

The size of this fund stands at 2.02 per cent. It is measured by its ratio to insured deposits. The Corporation has targeted the achievement of a ratio of 2.5 per cent by March 2028.

“Going forward, increased uncertainty is likely to pose a greater challenge to the functioning of deposit insurers,” Patra said, noting that climate change is emerging as a key risk.

“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.

First Published: Jun 18 2024 | 6:27 PM IST