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Due to bank crisis, non-performing assets (NPA) and fraud cases in the financial market, common account holders often have a fear in their mind that if their bank goes bankrupt or the Reserve Bank of India (RBI) imposes moratorium on it, then what will happen to their hard-earned money. To address this apprehension, the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly owned subsidiary of the Reserve Bank of India, provides legal insurance protection to depositors in all commercial and co-operative banks of the country. As per the rules of the Government of India and the Central Bank, every bank depositor in the country gets a guaranteed insurance cover up to a maximum of ₹ 5,00,000 (Rs five lakh) in the event of bankruptcy or liquidation of the bank. This limit is decided by combining both the principal and the interest earned on it.
DICGC essentially covers almost all types of banking institutions operating in the country:
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Banks involved: All Public Sector Government Banks, Private Commercial Banks, Regional Rural Banks (RRBs), Foreign Banks (with branches located in India), Small Finance Banks (SFBs) and State, Central and Primary Urban Co-operative Banks.
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Accounts included: All types of deposit accounts maintained by a customer in a bank—Savings Account, Current Account, Fixed Deposit (FD) and Recurring Deposit (RD) are protected under this.
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What is not included? Investments made in non-banking financial companies (NBFCs), mutual funds, stock market shares, government securities and Primary Agricultural Credit Societies (PACS) are not covered under this insurance.
As per the clear guidelines of RBI, the rule of insurance protection “Per Depositor, Per Bank” Works on the basis of. Even if you have different accounts in multiple branches of the same bank, they are all linked together:
| Scenario | principal deposit | interest earned | total amount in bank | Amount received by DICGC | sunk sum (loss) |
|---|---|---|---|---|---|
| Case 1: Less than ₹5 lakh | ₹3,00,000 | ₹25,000 | ₹3,25,000 | ₹3,25,000 (full amount) | ₹0 |
| Case 2: right at the limit | ₹4,70,000 | ₹30,000 | ₹5,00,000 | ₹5,00,000 (full amount) | ₹0 |
| Case 3: More than ₹5 lakh | ₹6,00,000 | ₹50,000 | ₹6,50,000 | ₹5,00,000 (maximum) | ₹1,50,000 |
| Case 4: Large deposit of ₹10 lakh | ₹10,00,000 | ₹80,000 | ₹10,80,000 | ₹5,00,000 (maximum) | ₹5,80,000 |
(Conclusion: If your total deposits are more than ₹ 5 lakh, in case of crisis you will get only ₹ 5 lakh immediately. The remaining amount is returned proportionately only in future by the liquidator by selling the bank’s assets.)
Many account holders think that if they have opened accounts in different branches of the same bank, then each branch will get a separate cover of ₹ 5 lakh, but this notion is completely wrong.
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For example, if you have a savings account of ₹3 lakh in the main branch of ‘Bank A’ and an FD of ₹4 lakh in another branch of the same ‘Bank A’, your total deposit will be considered as ₹7 lakh.
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In such a situation, if the bank is in trouble, you will have to pay only Rs. Maximum ₹5 lakh Only Rs. 2 lakh will be available, and the remaining Rs. 2 lakh will go into the realm of risk.
As per DICGC rules, accounts maintained in different ownership capacities are considered independent:
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Accounts in different banks: If you have deposited ₹5 lakh in ‘Bank A’ and ₹5 lakh in ‘Bank B’, then you will get an insurance cover of ₹5-5 lakh separately on both the banks. If both banks fall into trouble, your entire capital of ₹10 lakh will be 100% protected.
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Individual vs Joint Account:
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Individual Savings Account in the name of ‘Mr.
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Joint account in the name of ‘Mr.
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Joint account in the name of ‘Mrs. Y and Mr.
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Partnership or Trustee Account: Accounts held as proprietor, partner or trustee of a firm are treated separately from individual accounts and given a separate protection circle of ₹5 lakh.
Earlier, it used to take many years for the liquidation or legal process of the bank to be completed, due to which the common depositors had to face a lot of trouble. But now the payment timelines have been made strict after Parliament enacted the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act:
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First 45 days: The bank management has to prepare a list of claims and accounts of all depositors and submit it to DICGC within the first 45 days of the imposition of moratorium or withdrawal restrictions (Directions) by RBI on the bank.
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Next 45 days: DICGC, after scrutinizing and verifying the claims, transfers the interim insurance amount up to ₹5 lakh directly into the bank accounts of eligible depositors within the next 45 days.
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That is, after the ban on the bank Within maximum 90 days (3 months) The affected account holders get their protected amount back.
Many people have the misconception that any charge is deducted from their account for this insurance. The Central Bank has clarified that Not a single rupee is charged from depositors for this insurance..
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Its entire premium (currently 12 paise per year per ₹100 deposited) is borne by the concerned bank itself to DICGC.
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Even if a bank does not pay this premium on time, as long as its license is not cancelled, the general depositors’ insurance cover remains completely safe and valid.
In view of these guidelines of the Central Bank, financial advisors suggest that sensible investors should not keep their entire cash or deposits concentrated in a single bank. If you have a total capital of ₹15 lakh or ₹20 lakh, it should be divided into tranches of ₹5 lakh each in two or three different reputed commercial banks. Not only do you get the benefit of attractive interest rates from various banks, but your entire capital remains 100% legally protected in case any bank gets caught in an unexpected financial crisis.