Economics • Banking & FinanceMedium
What is the primary function of the Deposit Insurance and Credit Guarantee Corporation in the Indian financial system?
A. To provide refinance facilities to regional rural banks for agricultural loans
B. To insure all bank deposits up to a statutory limit per depositor per bank against bank failure✓ Correct Answer
C. To regulate credit rating agencies operating within corporate debt markets
D. To supervise non-banking financial companies engaged in housing finance
💡 Solution & Explanation
The Deposit Insurance and Credit Guarantee Corporation is a wholly owned subsidiary of the Reserve Bank of India that provides deposit insurance to depositors of insured banks up to a statutory ceiling per depositor per bank in the event of liquidation or amalgamation. This insurance coverage promotes public confidence in the banking system by protecting small savers against institutional default. The corporation charges insurance premiums directly to insured banks without placing any financial burden on depositors. Every commercial and cooperative bank functioning in India is required to register under this deposit insurance scheme.
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