Write short notes on the following: Deposit insurance

Deposit Insurance Companies (Acceptance of Deposits) Rules 2014 has made it mandatory for companies inviting deposits from the public to buy a deposit insurance at least 30 days before the issue of the circular or advertisement or at least 30 days before the renewal of the deposit, as the case may be. Such deposit insurance shall provide that in case the company defaults in repayment of principal amount and interest thereon, the depositor shall be entitled to the repayment of principal amount of deposits and the interest thereon by the insurer up to the aggregate monetary ceiling as specified in the insurance contract. The deposit insurance contract shall provide for payment of not less than ₹20,000 for each depositor or the amount of deposit and interest due, whichever is lower. The premium payable on such insurance shall be borne by the company and shall not be recovered from the depositors by deducting the same from the principal amount or interest payable thereon. If any company defaults in taking the insurance cover or any default is made in the terms and conditions of such cover, the company shall rectify the same within 30 days and the amount of deposit and interest in such cases, shall be paid within the next 15 days failing which the company shall be liable to pay interest at 15% per annum for the period of delay. In such circumstances, the company shall be treated as having defaulted and shall be liable to be punished in accordance with the provisions of the Act. Amendments have been made from time to time to make this mandatory, subject to availability of this product of insurance and currently, the deposit insurance is mandatory from 31st March 2018.