NEW INDIA CO-OPERATIVE BANK CRISIS AND DICGC’S ROLE

GS3 ECONOMICS: 

The New India Co-operative Bank in Mumbai is facing a crisis following allegations of a Rs 122 crore fraud. The Reserve Bank of India (RBI) has imposed severe restrictions, including barring the bank from granting new loans, renewing advances, and accepting new deposits. Depositors are also restricted from withdrawing funds for six months starting February 13, 2025. In response, the Deposit Insurance and Credit Guarantee Corporation (DICGC) offers crucial protection to depositors.

What is the DICGC?

• A subsidiary of the RBI, the DICGC protects depositors in case of bank failures.
• It insures deposits across all banks and offers a coverage of up to Rs 5 lakh per depositor.

Changes in Deposit Insurance Coverage

• Before April 2021: Insurance coverage was accessible only if a bank went into liquidation.
• Post-2021 Amendment: The DICGC Act now allows depositors to claim insurance even if the bank is under moratorium, providing quicker access to funds up to Rs 5 lakh.

DICGC’s Role in the Current Crisis

• In the case of New India Co-operative Bank, 90% of the 1.3 lakh depositors are covered by DICGC.
• Despite withdrawal restrictions, depositors can use their claims to offset loans owed to the bank.
• The DICGC guarantees repayment up to Rs 5 lakh, ensuring financial security for depositors.

Claim Process for Depositors

• Depositors must submit a claim to the DICGC, which verifies the claims.
• After verification, funds will be reimbursed within 90 days.
• The DICGC introduced Daava Soochak in 2024, an online tool for tracking claim status, ensuring transparency in the process.