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DEPOSIT INSURANCE AND CREDIT GUARANTEE CORPORATION ACT

Ministry of Law and Justice

Act nº 47 of 1961


  • Chapter I
  • Chapter II
  • Chapter III. Registration of Banking Companies and Co-Operative Banks as Insured Banks and Liability of Corporation to Deposetors
  • Chapter IIIA. Credit Guarantee Functions
  • Chapter IV
  • Chapter V
  • Schedules
  • Amending Acts
  • Act nº 47 of 1961

Preamble

THE DEPOSIT INSURANCE1[AND CREDIT GUARANTEE CORPORATION] ACT, 1961

[Act, No. 47 of 1961]

[7th December, 1961]

PREAMBLE

An Act to provide for the establishment of a corporation for the purpose of insurance of deposits2[and guaranteeing of credit facilites] and for other matters connected therewith or incidental thereto.

BE it enacted by Parliament in the Twelth Year of the Republic of India as follows:--

1. Inserted by Act 21 of 1978. Section. 8(1).

2. Inserted by Deposit Insurance Corporation (Amendment and Miscellaneous Provisions) Act 21 of 1978, Section.


Chapter I

Section 1. Short title, extent and commencement

(1) This Act may be called1[The Deposit Insurance and Credit Guarantee Corporation] Act, 1961.

(2) It extend to the whole of India.

(3) It shall come into force on such date2as the Central Government may, by notification in the Official Gazette, appoint.

1. Substituted for words "the Deposit Insurance Corporation" by Act 21 of 1978, Section. 8(2) (w.e.f.15-7-78).

2. The Act came into force on 1-1-1962, sec G.S.R. 18, dated 28-12-1961, Gazette of India, 1962, Pt. II, Section. 3(i) p.7.


Section 2. Definition

In this Act,unless the context otherwise requires,--

(a)"banking" means the accepting for the purpose of leading orinvestment of deposits of money from the public repayable on demand orotherwise, and withdrawable by cheque, draft, order or otherwise;

(b)"banking company" means any company which transacts the business ofbanking in India and includes the State Bank 1 [and a subsidiarybank] but does not include the 2 [Tamil Nadu Industrial InvestmentCorporation Limited];

Explanation:--Any company which is engaged in the manufactured of foods or carries on anytrade and which accepts deposits of money from the public merely for thepurpose of financing its business as such manufacturer or trader shall not bedeemed to transact the business of banking within the meaning of the clause;

(a)"Board" means the Board of Directors constituted under section 6;

(d)"company" means any company as defined in section 3 of the CompaniesAct, 1956 and includes a foreign company within the meaning of section 561 ofthat Act;

3 [(dd) "co-operative bank" means a Stateco-operative bank, a Central co-operative bank and a primary co-operativebank;]

(e)"Corporation" means 4 [the Deposit Insurance and CreditGuarantee Corporation] established under section 3;

5 [(ee) "corresponding new bank" means a correspondingnew bank constituted under section 3 of the Banking companies (acquisition andTransfer of Undertakings) Act, 1970 or, as the case may be, under section 3 ofthe Banking companies (Acquisition and Transfer of Undertakings) Act, 1980;]

6 [(eea) "credit institution" means all or any of thefollowing, namely :--

(i) a bankingcompany;

(ii) acorresponding new bank;

(iii) a RegionalRural Bank;

(iv) aco-operative bank;

(v) a financialinstitution];

(f) defunct banking"means a banking company-

(i) which hasbeen prohibited from receiving fresh deposits; or

(ii) which hasbeen ordered to be wound up; or

(iii) which hastransferred all its deposit liabilities in India to any other institution; or

(iv) which hasceased to be a banking company within the meaning of sub-section (2) of section36A of 7 [the Banking Regulation Act, 1949,] or has converted itselfinto a non-banking company; or

(v) in respectof which a liquidator has been appointed in pursuance of a resolution for thevoluntary winding up of its affairs; or

(vi) in respectof which any scheme of compromise or arrangement or of reconstruction has beensanctioned by any competent authority and the said scheme does not permit theacceptance of fresh deposits; or

(vii) which hasbeen granted a moratorium which is in operation; or

(viii) inrespect of which an application for the winding up of its affairs is pending ina competent Court;

8 [(ff) "defunct co-operative bank" means aco-operative bank-

(i) which has beenprohibited from receiving fresh deposits; or

(ii) which hasbeen ordered or direct to be wound up; or

(iii) which hastransferred all its deposit liabilities in India to any other institution; or

(iv) which hasceased to be a co-operative bank within the meaning of sub-section (2) ofsection 36A of the Banking Regulation Act 1949; or

(v) which hasconverted itself into a non-banking co-operative society; or

(vi) in respectof which any scheme of compromise or arrangement or of reconstruction has beensanctioned under any law for the time being in force and such scheme does notpermit the acceptance of fresh deposits; or

(vii) which hasbeen granted a moratorium which is in operation; or

(viii) inrespect of which an application for winding up is pending before the Registrarof Co-operative Societies or other competent authority under any law relatingto co-operative societies for the time being in a force in a State.]

(g)"deposit" means the aggregate of the upaid balances due to adepositor (other than a foreign Government, the Central Government, a StateGovernment, 9 [a corresponding new bank 10 [or a RegionalRural Bank or a banking company or a co-operative bank] in respect of all hisaccounts by whatever name called, 11 [with a corresponding new bank or10 [with a Regional Rurual Bank or with a banking company] or aco-operative bank]] and includes credit balances in any cash credit account butdoes not include,--

(i) 11 [wherea banking company 13 [or a Regional Rural Bank] or a correspondingnew bank] at the commencement of this Act 12 [or where an eligibleco-operative bank at the commencement of the Deposit Insurance Corporation(Amendment) Act, 1968] is working under a scheme of compromise or arrangementor of reconstruction sanctioned by any competent authority providing for theacceptance of fresh deposits any amount due to the depositor in respect of hisdeposit before the date of the coming into force of the scheme of the extent itis not credited after the aid date under the provisions of that scheme; or

(ia) any amountdue on account of any deposit with any insured bank which has been speciallyexempted in this behalf by the Corporation with the previous approval of theReserve Bank; or

(ii) any amountdue on account of any deposit received outside India;

14 [(gg) "eligible co-operative bank" meansa co-operative bank the law for the time being governing which provides that-

(i) an order forthe winding up, or an order sanctioning a scheme of compromise or arrangementor of amalgamation or reconstruction, of the bank may be made only with theprevious sanction in writing of the Reserve Bank;

(ii) an orderfor the winding up of the bank shall be made if so required by the Reserve Bankin circumstances referred to in section 13-D;

(iii) if sorequired by the Reserve bank in public interest or for preventing the affairsof the bank being conducted in a manner detrimental to the interests of thedepositors or for securing the proper management of the bank, an order shall bemade for the supersession of the committee of management or other managing body(by whatever name called) of the bank and the appointment of an administratortherefore for such period or periods not exceeding 5 years in the aggregate asmay from time to time be specified by the Reserve Bank;

(iv) an orderfor the winding up of the bank or an order sanctioning a scheme of compromiseor arrangement or of amalgamation or reconstruction or an order for thesupersession of the committee of management or other managing body (by whatevername called) of the bank and the appointment of an administrator therefore madewith the previous sanction in writing or on the requisition of the Reserve Bankshall not be liable to be called in question in any manner; and

(v) theliquidator or the insured bank or the transferee bank, as the case may be,shall be under an obligation to repay the Corporation in the circumstances tothe extent and in the manner referred to in section 21.]

(h)"existing banking company" means a banking company carrying on thebusiness of banking at the commencement of this Act which either holds alicence at such commencement under section 22 of 15 [the BankingRegulation Act, 1949] or having applied for such licence has not been informedby notice in writing by the Reserve Bank that a licence cannot be granted to itand includes the State Bank and subsidiary bank, but does not include a defunctbanking company;

16 [(hh) "existing co-operative bank" means aco-operative bank carrying on the business of banking at the commencement ofthe Deposit Insurance Corporation (Amendment) Act, 1968, which either holds alicence at such commencement under section 22 of the Banking Regulation Act,1949, or having applied for such lience has not been informed by notice inwriting by the Reserve Bank that a licence cannot be granted to it but does notinclude a defunct co-operative bank;]

17 [(hha) " Financial institution" means anyfinancial institution within the meaning of clause (c) of section 451 of theReserve Bank of India Act, 1934;]

18 [(i) "insured bank" means a 20 [abanking company] 21 [or a Regional Rural Bank]] 19 [or acorresponding new bank] or an eligible co-operative bank for the time beingregistered under the provisions of this Act and includes for the purposes ofsection 16, 17, 18 and 21,--

22 [(i) a banking company referred to in clause (a) orclause (b) of sub-section (1) of section 13, or

(ia) acorresponding new bank to which the provisions of clause (a) of sub-section (1)of section 13 apply, or]

(iii) aco-operative bank referred to in clause (a) or clause (b) of section 13-C;] theregistration whereof has been cancelled under section 13, or, as the case maybe, under section 13-C;]

(j)"insured deposit" means the deposit or any portion thereof therepayment whereof is insured by the Corporation under the provisions of thisAct;

(k) "newbanking company" means a banking company which beings to transact thebusiness of banking after the commencement of this Act under a licence grantedto it under section 22 23 [the Banking Regulation Act, 1949] 24 [xxxxx];

25 [kk] "new co-operative bank" means aco-operative bank which begins to transact the business of banking after thecommencement of the Deposit Insurance Corporation (Amendment) Act, 1968, undera licence granted to it under a primary credit society becoming a primaryco-operative bank after such commencement;]

(l)"premium" means the sum payable by an insured bank under section 15of this Act;

(m)"prescribed" means prescribed by regulations made under this Act;

26 [(ma) "Regional Rural Bank" means aRegional Rural Bank established under section 3 of the Regional Rural BanksAct, 1976;]

(n)"Reserve Bank" means the Reserve Bank of India constituted under theReserve Bank of India Act, 1934;

(o) "StateBank" means the State Bank of India constituted under the State Bank ofIndia Act, 1955;

(p)"subsidiary bank" shall have the meaning assigned to it in section 2of the State Bank of India (Subsidiary Banks) Act, 1959;

27 [(q) the expressions "Central Co-operativeBank, 28 [***] and "State Co-operative Bank" shall have themeanings respectively assigned to them in the National Bank for Agriculture andRural Development Act, 1981;

(r) theexpressions 29 ["co-operative society", "primaryco-operative bank"] and "primary credit society" shall have themeanings respectively, assigned to them in Part V of the Banking RegulationAct, 1949].

1.Substituted for the words. "a subsidiary bank and any otherbanking institution notified under Section 51 of the Banking Regulation Act,1949" by Banking Laws (Amendment) Act (1 of 1984), Section 56 (w.e.f.15-2-1984).

2.Substituted for words "Madras Industrial InvestmentCorporation Limited" by Repealing and Amending Act (56 of 1974), Section 3 2ndSch.

3. Inserted by Act56 of 1968. Section 2(i).

4.Substituted for words "the deposit Insurance Corporation"by Deposit Insurance Corporation (Amendment and Miscellaneous Provisions)Act 21 of 1978, Section 8(3)(i) (w.e.f. 15-7-78).

5.Substituted by Banking Laws (Amendment) Act (1 of 1984), Section 56(w.e.f. 15-2-1984).

6.Inserted by Deposit Insurance Corporations (Amendment andMiscellaneous Provisions) Act 21 of 1978, Section 8(3) (i) (w.e.f. 18-7-8).

7.Substituted by Act 56 of 1968, Section 2.

8.Inserted by Act 56 of 1968, Section 3(ii)

9.Substituted for "with a banking company" by Act 5 of1970, Section 20(4).

10.Substituted by Act 56 of 1968, Section 3(iii)

11.Substituted by Act 5 of 1970, Section 20(4)(a)(ii) (w.r.e.f.19-7-1969).

12.Substituted by Act 56 of 1968, Section 3(iii)(c).

13.Substituted for words "a banking company" and "witha banking company" by Act 21 of 1976, Section 33(5) (w.e.f. 26-9-75).

14.Inserted by Act 56 of 1968, Section 3(iv).

15.Substituted by Act 56 of 1968, Section 2.

16.Inserted by Act 56 of 1968, Section 3(v).

17.Inserted by Act 21 of 1978, Section 8(3) (iii)(15-7-1978)

18.Substituted for original clause (i) by Act 56 of 1968, Section3(vi).

19.Inserted by Act 5 of 1970, Section 20(4)(a)(iii)(w.r.e.f.19-7-1969).

20.Substituted for words "corresponding new bank of a bankingcompany" by Repealing and Amending Act (19 of 1988) Section 3 (w.e.f. 31-3-88).

21.Inserted by Act 21 of 1976, Section 33 (5) (26-9-75).

22.Substituted for sub-clause (i) by Banking Laws (Amendment) Act (1of 1984), Section 56 (w.r.e.f 19-7-69).

23.Substituted by Act 56 of 1968, Section 2.

24. Words, "and includes any banking institution notifiedunder section 51 of the said Act after such commencement" omitted byBanking Laws (Amendment) Act (1 of 1984), Section 56 (w.e.f. 15-2-84).

25.Inserted by Act 56 of 1968, Section 3 (vii).

26.Inserted by Act 21 of 1976, Section 33(5) (w.e.f. 26-9-75)

27.Clause (q) substituted by National Bank for Agriculture and RuralDevelopment Act (61 of 1981).

28. Omitted by Act No. 24 of 2004.

29. Inserted by Act No. 24 of 2004.


Chapter II

Section 3. Establishment And Incorporation Of Deposit Insurance Corporation

(1) The Central Government shall, by notification1in the Official Gazette, establish a Corporation by the name of the Deposit Insurance Corporation which shall be a body corporate having perpetual succession and a common seal with power, subject to the provisions of this Act, to acquire, hold or dispose of property and to contract, and may, by the said name, sue or be sued.

2[1A) Any reference in this Act to the Deposit Insurance Corporation shall, on and from the date on which Chapter II of the Deposit Insurance Corporation (Amendment and Miscellaneous Provisions) Act, 1978, comes into force, be construed as a reference to the Deposit Insurance and Credit Guarantee Corporation.]

(2) The head office of the Corporation shall be at Bombay, but it may, with the previous sanction of the Reserve Bank, establish branches or agencies in any other place in India.

1. Deposit Insurance Corporation was established with effect from 1-1-1962.

2. Inserted by Act 21 of 1978, Section. 8(4), (w.e.f. 15-7-78).


Section 4. Capital Of Corporation

1[4. Capital Of Corporation .--

(1) The authorised capital of the Corporation shall be one crore of rupees but the Central Government may, in consultation with the Reserve Bank, increase such capital from time to time, so however, that the total authorised capital shall not exceed2[fifty crores of rupees].

(2) The3[issued capital] for the time being of the Corporation shall be fully paid up and shall stand allotted to the Reserve Bank].

1. Substituted for the original S. 4 by Act 56 of 1968, Section. 4.

2. Substituted for words "fifteen cores of rupees" by Banking Laws (Amendment) Act (1 of 1984), Section. 57 (w.e.f. 15-2-840.

3. Substituted for words "five crores" and "authorised capital" respectively by Act 21 of 1978, Section. 8(5) (w.e.f. 15-7-78).


Section 5. Management Of Corporation

Thegeneral superintendence, direction and the management of the affairs andbusiness of the Corporation shall vest in a Board of directors which mayexercise all powers and do all acts and things which may be exercised or done bythe Corporation.

Section 6. Board Of Directors

(1) The Board of directors of the Corporation shall consist of the following, namely:--

1[(a) the Governor, for the time being, of the Reserve Bank or, if the Reserve Bank, in pursuance of the decision of the Committee of the Central Board of Directors of that Bank, nominates any Deputy Governor for the purpose, the Deputy Governor so nominated, who shall be the Chairman of the Board;]

(b)2[a Deputy Governor or any other officer] of the Reserve Bank nominated by that bank;

(c) an officer of the Central Government nominated by that Government;

3[(d) five directors nominated by the Central Government in consultation with the Reserve Bank, three of whom shall be persons having special knowledge of commercial banking, insurance, commerce, industry or finance and two of whom shall be persons having special knowledge of, or experience in, co-operative banking or co-operative movement and none of the directors shall be an officer of Government or of the Reserve Bank or an officer or other employee of the Corporation or a director, an officer or other employee of a banking company or a co-operative bank or otherwise actively connected with a banking company or a co-operative bank].

4[(e) four directors, nominated by the Central Government in consultation with the Reserve Bank, having special knowledge or practical experience in respect of accountancy, agriculture and rural economy, banking, co-operation, economies, finance, law or small-scale industry or any other matter, the special knowledge of, and practical experience in which, is likely, in the opinion of the Central Government to be useful to the Corporation].

5[(2) (i). A director nominated under clause (b) or clause (c)6[or clause (d) or clause (c)] of sub-section (1) shall hold office during the pleasure of the authority nominating him; and

7[(ii) Subject to the provisions contained in clause (i), a director nominated under clause (d) or clause (c) of sub-section (1), shall hold office for such period, not exceeding three years, as may be specified by the Central Government in this behalf9[***], and shall be eligible for renomination:

Provided that no such director shall hold office continuously for a period exceeding six years].]

(3) A person shall not be capable of being nominated as a director under clause (d)8[or clause (c)] of sub-section (1) if--

(a) he has been removed or dismissed from the service of Government or of a local authority or of a corporation or company in which not less than fifty-one per cent of the paid-up share capital is held by Government; or

(b) he is or at any time has been adjudicated as insolvent or has suspended payment of his debts or has compounded with his creditors; or

(c) he is unsound mind and stand so declared by a competent Court; or

(d) he has been convicted of any offence which in the opinion of the Central Government, involves moral turpitude.

(4) If a director nominated under clause (d) sub-section (1)--

(a) becomes subject to any of the disqualifications mentioned in clauses (a) to (d) of sub-section (3); or

(b) is absent without leave of the Board for more than three consecutive meetings thereof; or

(c) becomes a director or an officer or an employee of an insured bank or is, in the opinion of the Central Government, otherwise actively connected with such bank; or

(d) becomes an officer or other employee of Government or of the Reserve Bank or of the Corporation;

his seat shall thereupon become vacant.

8[(5) If a director nominated under clause (e) of sub-section (1)--

(a) becomes subject to any of the disqualifications mentioned in clauses (a) to (d) of sub-section (3); or

(b) is absent without leave of the Board for more than three consecutive meetings thereof, his seat shall thereupon becomes vacant].

1. Substituted by Act 21 of 1978, Section. 8(g) (15-7-78).

2. Substituted by Act 56 of 1968, Section. 5(i).

3. Substituted for original clause (d), by Act 56 of 1968, Section. 5(ii).

4. Inserted by Act 21 of 1978, Section. 8(6) (w.e.f. 15-7-1978).

5. Substituted by Banking Laws (Amendment) Act (1 of 1984), Section. 58 (w.e.f. 15-2-84).

6. Inserted by Banking Public Finance Institutions and negotiable Instruments Laws (Amendment) Act (66 of 1988),section 24 (w.e.f. 30-12-88).

7. Substituted, by Banking Public Finance Institutions and negotiable Instruments Laws (Amendment) Act (66 of 1988),section 24 (w.e.f. 30-12-88).

8.Inserted, by Banking Laws (Amendment) Act (1 of 1984),section 58 (w.e.f. 15-2-84).

9. The following words "and thereafter until his successor assumes office" are to be omitted by the Banking Companies (Acquisition and Transfer of Undertakings) and Financial Institutions Laws (Amendment) Act, 2006, w.e.f. 16.10.2006 .


Section 7. Meetings Of Board

(1) The Board shall meet at such times and places and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed.

(2) The Chairman or if for any reason he is unable to attend the director nominated under clause (b) of sub-section (1) of section 6 shall preside at meetings of the Board and, in the event of equality of votes, shall have a second or casting vote.

Section 8. Committees Of Corporation

(1) The Board may constitute an Executive Committee consisting of such number of directors as may be prescribed.

(2) The Executive Committee shall discharge such functions as may be prescribed or may be delegated to it by the Board.

(3) The Board may constitute such other committees, whether consisting wholly of directors or wholly of other persons or partly of directors and partly of other persons as it thinks fit for the purpose of discharging such of its functions as may be prescribed or may be delegated to them by the Board.

(4) A committee constituted under this section shall meet at such times and places and shall observe such rules of procedure in regard to the transaction of business at its meetings as may be prescribed.

(5) The members of a committee (other than directors of the Board) shall be paid by the Corporation such fees and allowances for attending its meeting and for attending to any other work of the Corporation as may be prescribed.

Section 9. Fees And Allowances Of Directors

The directors of the Board shall be paid by the Corporation such fees and allowances for attending the meetings of the Board or of any its committees and for attending to any other work of the Corporation as may be prescribed:

Provided that no fees shall be payable to the Chairman or to the director nominated under clause (b) of clause (c) of sub-section (1) of section 6.

Chapter III
Registration of Banking Companies and Co-Operative Banks as Insured Banks and Liability of Corporation to Deposetors

1. Inserted by Act 56 of 1968, Section. 6.


Section 10. Registration Of Existing Banking Companies

The Corporation shall register every existing banking company as an insured bank before the expiry of thirty days from the date of commencement of this Act.

Section 11. Registration Of New Banking Companies

The Corporation shall register every new banking company as an insured bank as soon as may be after it is granted a licence under section 22 of the1[Banking Regulation Act, 1949],2[*****]

1. Substituted by Act 56 of 1968, Section. 2.

2. Words "or, as the case may be, after it is notified under Section 51 of the said Act omitted by Banking Laws (Amendment) Act (1 of 1984), Section. 59 (w.e.f. 15-2-84)