0
0

Deposit Insurance & Credit Guarantee (DICGC)

Introduction

Deposit Insurance & Credit Guarantee is a key safety mechanism in the Indian banking system that protects depositors’ money if a bank fails. This concept is frequently tested in SBI and IBPS exams through direct amount-based and coverage-based questions.

Understanding DICGC helps candidates clearly differentiate between deposit protection and loan recovery laws like SARFAESI.

Pattern: Deposit Insurance & Credit Guarantee (DICGC)

Pattern

The key idea is that DICGC provides insurance cover to bank deposits up to a specified limit, ensuring depositor safety if a bank fails.

Step-by-Step Example

Question

Under the Deposit Insurance and Credit Guarantee scheme, what is the maximum amount insured per depositor in a bank?

Options:
A. ₹1,00,000
B. ₹2,00,000
C. ₹5,00,000
D. ₹10,00,000

Solution

  1. Step 1: Recall the insured deposit limit

    DICGC provides insurance cover up to a fixed maximum amount per depositor per bank.

  2. Step 2: Apply the current insurance limit

    The insured amount under DICGC is ₹5,00,000 per depositor.

  3. Step 3: Match with the correct option

    Among the given options, ₹5,00,000 correctly matches the insured limit.

  4. Final Answer:

    ₹5,00,000 → Option C

  5. Quick Check:

    Depositor protection limit = ₹5 lakh under DICGC ✅

Quick Variations

• Questions may ask “Who gets protection?” → Depositors, not banks.

• Insurance applies per depositor per bank.

• Credit guarantee part is not commonly tested in detail at basic level.

Trick to Always Use

  • Step 1 → If the question mentions depositor safety, think DICGC.
  • Step 2 → Remember the fixed figure: ₹5 lakh.
  • Step 3 → Eliminate options related to loan recovery or asset seizure.

Summary

Summary

  • DICGC protects depositors, not banks.
  • The maximum insured amount is ₹5,00,000 per depositor per bank.
  • It applies in case of bank failure or liquidation.
  • DICGC is different from loan recovery laws like SARFAESI.

Example to remember:
“Bank fails → Depositor protected up to ₹5 lakh by DICGC.”

Practice

(1/5)
1. Deposit Insurance under DICGC is mainly intended to protect:
easy
A. Bank depositors
B. Shareholders of banks
C. Bank employees
D. Borrowers of banks

Solution

  1. Step 1: Identify the purpose of deposit insurance

    The scheme is designed to ensure safety of public money kept in banks.

  2. Step 2: Match the beneficiary

    Only depositors receive protection if a bank fails.

  3. Final Answer:

    Bank depositors → Option A

  4. Quick Check:

    DICGC = depositor protection, not shareholder benefit ✅
Hint: Deposits at risk → DICGC protects depositors.
Common Mistakes: Assuming DICGC protects banks or shareholders instead of depositors.
2. Deposit insurance cover provided by DICGC is calculated on which basis?
easy
A. Per branch of a bank
B. Per depositor per bank
C. Per account held by a depositor
D. Per financial year

Solution

  1. Step 1: Recall the coverage rule

    DICGC coverage is linked to the depositor and the bank.

  2. Step 2: Eliminate incorrect bases

    Coverage is not account-wise, branch-wise, or year-wise.

  3. Final Answer:

    Per depositor per bank → Option B

  4. Quick Check:

    Multiple accounts in one bank = single combined cover ✅
Hint: Remember: person + bank = one insurance limit.
Common Mistakes: Thinking each account gets separate insurance cover.
3. Which of the following types of deposits is covered under DICGC insurance?
easy
A. Only current deposits
B. Only savings deposits
C. Savings, current, fixed, and recurring deposits
D. Only fixed deposits above ₹5 lakh

Solution

  1. Step 1: Identify deposits eligible for insurance

    DICGC covers all common bank deposit types.

  2. Step 2: Verify comprehensive coverage

    Savings, current, fixed, and recurring deposits are included.

  3. Final Answer:

    Savings, current, fixed, and recurring deposits → Option C

  4. Quick Check:

    All basic bank deposits are covered under DICGC ✅
Hint: If it’s a bank deposit, it is generally insured.
Common Mistakes: Believing only savings or fixed deposits are insured.
4. DICGC insurance becomes applicable to a depositor mainly when:
medium
A. Interest rates fall sharply
B. A bank increases service charges
C. A borrower defaults on a loan
D. A bank is liquidated or faces failure

Solution

  1. Step 1: Understand the trigger for insurance

    DICGC protection activates when a bank cannot repay depositors.

  2. Step 2: Identify the correct situation

    Bank failure or liquidation leads to insurance payout.

  3. Final Answer:

    A bank is liquidated or faces failure → Option D

  4. Quick Check:

    DICGC is for bank failure scenarios, not normal operations ✅
Hint: No bank failure = no insurance claim.
Common Mistakes: Assuming DICGC applies during normal banking losses or defaults.
5. Which of the following statements about DICGC is correct?
medium
A. It ensures depositor confidence in the banking system
B. It helps banks recover bad loans
C. It fixes lending rates for banks
D. It regulates mergers of banks

Solution

  1. Step 1: Recall the broader objective

    DICGC builds trust among depositors.

  2. Step 2: Eliminate unrelated functions

    Loan recovery, rate fixation, and mergers are outside DICGC’s role.

  3. Final Answer:

    It ensures depositor confidence in the banking system → Option A

  4. Quick Check:

    Depositor safety leads to system confidence ✅
Hint: DICGC = confidence + safety for depositors.
Common Mistakes: Confusing DICGC with recovery or regulatory laws.

Mock Test

Ready for a challenge?

Take a 10-minute AI-powered test with 10 questions (Easy-Medium-Hard mix) and get instant SWOT analysis of your performance!

10 Questions
5 Minutes