"Banks Are Also Commercial Ventures": Delhi High Court Refuses To Increase Insurance Coverage For Depositors

The Delhi High Court on Wednesday refused to issue directions to the Deposit Insurance and Credit Guarantee Corporation (DICGC) to increase the insurance coverage for depositors in insured banks. The current maximum limit of insurance against deposits in insured banks is Rs. 5 lakh.

A Division Bench of Acting Chief Justice Vipin Sanghi and Justice Navin Chawla observed that the Banks are also "in business" and it would be "impractical" for the Court to pass such a direction.

"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," the Bench said.

The development ensued in a writ petition filed in 2017, stating that irrespective of the amounts of the deposit which has been made by an account holder with the Bank, the DICGC has set a limit of insurance of all deposits including savings, fixed, current, recurring at a maximum of Rs.1 lakh (now 5 lakh).

DICGC is a wholly owned subsidiary of the Reserve Bank of India, which exercises its jurisdiction under the DICGC Act, 1961, and is covered under the deposit insurance scheme of the corporation.

On February 4, 2020, it raised the insurance cover in respect of accounts maintained by banks to Rs. 5 lakh. In light of this development, the Court said that no further orders called for at this stage.

It added that as per Section 60 of the DICGC Act, even after payment of the insurance amount, the liability of bank towards the depositors still survives and therefore, even if the bank in which the depositor has the account goes into losses and eventually into winding up, the depositors would stand in queue as Creditors and would be entitled to receive further amounts in terms of the liquidation plan.

Case Title: PARDEEP KUMAR v. UNION OF INDIA & ORS

Citation: 2022 LiveLaw (Del) 319