Monday, October 3, 2022

Delhi High Court says impractical to ask banks to insure deposits beyond statutory RBI norms

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The Delhi High Court on Wednesday stated that banks are also businesses and it would be impractical for the Court to issue directions to the Deposit Insurance and Credit Guarantee Corporation (DICGC) to increase the insurance coverage for depositors in insured banks.

A Division Bench of Acting Chief Justice Vipin Sanghi and Justice Navin Chawla was hearing a 2017 petition, where the petitioner had moved against the limit set by the DICGC of a maximum insurance of all deposits including savings, fixed, current, recurring at a maximum of Rs 1 lakh, which has subsequently been raised to Rs 5 lakh.

“Banks are also commercial ventures. They receive monies and lend out monies and render other services for which they levy service charges and charge interest. It is not possible for banks to secure insurance for all the monies that they receive from their customers as that would lead to financial difficulties for the banks”

-observed the bench.

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The DICGC, which is a wholly owned subsidiary of the Reserve Bank of India, had raised the insurance cover of accounts maintained by the bank to Rs 5 lakh; in light of the aforementioned change, the Court was of the opinion that no further orders are required in the matter.

The Court stated that according to Section 60 of the DICGC Act, even when the insurance amount is paid, the bank is not discharged of its liability, the depositors would become the creditors of the bank for the pending amount and would be entitled to receive their dues from the liquidation.

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