Friday, June 14, 2024

Deposit Insurance coverage – What occurs in case your financial institution fails?


Deposit insurance coverage got here again to limelight after the Silicon Valley Financial institution or SVB disaster within the USA. Given the worldwide nature of the economic system, individuals in India too began to ask if the banks may have an issue and are they lined by Deposit Insurance coverage.

In any case, not alongside in the past we had failing banks such because the Lakshmi Vilas Financial institution, Punjab and Maharashtra Financial institution, to not overlook the scare with Sure Financial institution.

Now, presently there are not any troubled banks, however what occurs in case your financial institution goes beneath. What occurs to the cash you might have within the financial institution?

A very powerful factor that you have to know is that every one financial institution deposits are insured with the DICGC or the Deposit Insurance coverage and Credit score Assure Company of India.

However there are specific issues that you have to find out about this protection and eligibility.

Listed here are a couple of FAQs that may provide help to perceive this layer insurance coverage higher. All FAQs are taken from this hyperlink on the DICGC web site.

What does the DICGC insure?

The DICGC insures all deposits resembling financial savings, fastened, present, recurring, and so on. deposits of most business banks, overseas banks, native space banks and regional rural banks. At current all co-operative banks are additionally lined. 

Major cooperative societies will not be insured by the DICGC.

What’s the most deposit quantity insured?

Every depositor in a financial institution is insured upto a most of5,00,000 (Rupees 5 Lakhs) for each principal and curiosity quantity held by him / her.

Nonetheless, this restrict is relevant on each possession kind. For instance, when you’ve got a single holding financial savings account and one other joint holding financial savings account, then the Rs. 5 lakh restrict will likely be relevant to each accounts individually, even in the identical financial institution.

Additional, when you’ve got a present account with the financial institution, it’s also lined individually for the Rs. 5 lakh insurance coverage.

Let’s say you might have Rs. 5.5 lakh in you private financial savings account (single holding), Rs. 3 lakh within the joint holding account and Rs. 10 lakh within the present account, then in case of financial institution default, that is how deposit insurance coverage will work.

Account Sort Precise
Deposit Quantity
Recoverable from
Deposit Insurance coverage
Single Holding Financial savings ₹ 5,50,000 ₹ 5,00,000
Joint Holding Financial savings ₹ 3,00,000 ₹ 3,00,000
Present Account ₹ 10,00,000 ₹ 5,00,000
All accounts in the identical financial institution

The insurance coverage can pay you Rs. 5 lakhs (max) for the one holding account, Rs. 3 lakhs for the joint holding account and Rs. 5 lakhs (max) for the present account.

If I’ve cash in several branches of the financial institution, how a lot insurance coverage is relevant to me?

Throughout branches of the identical financial institution, the quantity is totaled and most Rs. 5 lakh deposit insurance coverage is relevant to your account.

What if I’ve cash in several banks?

For every financial institution, you should have a separate Rs. 5 lakh insurance coverage restrict relevant. This is applicable even when you’ve got a single account holding in every of the banks.

The way to know if my financial institution is insured by the DICGC or not?

Easy, test with the financial institution. Whereas most banks are lined, it’s good to search out out if the protection is energetic.

Can I enhance my deposit insurance coverage with the financial institution and enhance it to say Rs. 10 lakhs per account kind?

That is presently not potential. You possibly can open completely different account sorts or accounts with completely different banks to get a better cowl general.

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