A group representing depositors of failed co-operative banks across India has filed a Public Interest Litigation (PIL) before the Bombay High Court, challenging key provisions of the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, 1961. The petition seeks to declare Sections 16 and 21 of the Act unconstitutional for limiting deposit insurance to Rs 5 lakh and prioritizing DICGC over depositors during liquidation.
Filed on behalf of depositors from Karwar Urban Co-operative Bank (Karnataka), Sai Nagari Sahakari Bank (Maharashtra), and others, the PIL argues that the current framework unfairly penalizes innocent depositors for systemic failures caused by poor governance and regulatory negligence.
The petition highlights that while DICGC collects insurance premiums on the entire deposit base, depositors receive coverage only up to Rs 5 lakh, an amount termed “grossly inadequate” in today’s economy. It also points to delays in payout beyond the statutory 90-day period and the existence of a large DICGC surplus exceeding Rs 1.5 lakh crore.
The petitioners have sought a court direction for proportionate insurance cover, strict adherence to the 90-day payout rule, and creation of a transparent framework for utilizing DICGC’s surplus for depositors’ benefit. The matter is expected to come up for hearing shortly.