Jane Dotson
Bank accounts in India are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a fully owned subsidiary of the Reserve Bank of India. The DICGC scheme insures deposits of up to ₹5 lakh in each account with banks, covering 98% of bank accounts. This insurance cover was raised from ₹1 lakh in February 2020, providing depositors with easier and
| Characteristics | Values |
|---|---|
| Insurance cover | Rs 5 lakh from Rs 1 lakh |
| Types of deposits covered | Savings accounts, fixed deposits (FD), current accounts, recurring deposits (RD) |
| Types of banks covered | Commercial banks, local area banks, regional rural banks, co-operative banks |
| Excluded deposits | Foreign governments, central/state governments, state land development banks with a state co-operative bank, inter-bank deposits, deposits received outside India |
| Maximum insurance cover | Rs 65 lakh |
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What You'll Learn
The Deposit Insurance and Credit Guarantee Corporation (DICGC)
The DICGC insurance scheme covers a wide range of deposits, including savings accounts, fixed deposits, current accounts, and recurring deposits. It applies to various types of banks, such as commercial banks (including public, private, and foreign banks operating in India), cooperative banks (central, state, and urban cooperative banks), and regional rural banks (RRBs).
In the unfortunate event of a bank failure, the bank's liquidator submits claims on behalf of the depositors to the DICGC. After thorough verification, the DICGC releases the insured amount to the depositors through the liquidator. This process ensures that depositors receive up to ₹5 lakh of their deposits, providing crucial protection even if a bank becomes insolvent. It is important to note that this limit applies per depositor per bank and includes both the principal amount and interest.
The DICGC plays a vital role in sustaining financial stability and encouraging savings. With the assurance of deposit insurance, individuals are more inclined to deposit their money in banks, promoting financial inclusion and enhancing liquidity in the economy. The DICGC has also undertaken initiatives to raise public awareness about deposit insurance, empowering depositors to make informed decisions and check if their bank is covered by the DICGC.
It is worth mentioning that the DICGC is subject to ongoing reforms. The Financial Sector Legislative Reforms Commission (FSLRC) has proposed the establishment of a Resolution Corporation (RC) that will encompass the functions of the current DICGC. This new regulatory structure aims to address a broader range of financial firms and ensure comprehensive oversight of the Indian financial sector.
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Rs 5 lakh insurance cover
In India, bank deposits are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) under the DICGC Act, 1961. The DICGC insurance cover was raised from Rs 1 lakh to Rs 5 lakh per depositor in February 2020. This means that in case of bank failure, depositors can claim up to Rs 5 lakh of their deposits back, including both the principal and interest amounts. This insurance cover applies to all types of bank accounts such as savings accounts, fixed deposits, current accounts, and recurring deposits.
The Rs 5 lakh insurance cover is available to all banks that have registered for this facility and paid the corresponding insurance premium. Banks pay a premium of 0.001% of their deposits annually to the DICGC to enjoy this insurance cover. This cover is also available for customers who have multiple accounts in different branches of the same bank or in different banks. In the case of joint accounts, both single and joint accounts are separately covered under the DICGC scheme.
According to the Reserve Bank of India (RBI), 98% of bank accounts in India are fully protected by the DICGC insurance. This amounts to approximately Rs 76,21,258 crore of insured deposits as of March 2021. However, it is important to note that this insurance cover only applies to deposits up to Rs 5 lakh, and any amount exceeding this limit will not be insured. Therefore, individuals with deposits exceeding Rs 5 lakh may consider diversifying their deposits across multiple bank accounts to maximise their insured amount.
The DICGC insurance scheme aims to provide customer protection and easy access to their insured deposits in a time-bound manner. In the past, it has taken several years to settle claims, but the DICGC is working towards reducing this timeframe. For example, in the case of YES Bank, depositors had limited access to their deposits and had to wait for over a month for a new management team to be put in place. Now, the DICGC aims to provide refunds within 90 days of the closure of a bank.
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Savings accounts, fixed deposits, current accounts, recurring deposits
In India, bank depositors are covered by the DICGC (Deposit Insurance and Credit Guarantee Corporation) insurance scheme up to Rs 5 lakh per account. The insurance coverage extends to various deposit types, including savings accounts, fixed deposits, current accounts, and recurring deposits.
Savings accounts are insured by the DICGC up to Rs 5 lakh per account. This coverage provides protection for depositors in the event of bank failure or liquidation. It is important to note that the insurance coverage is limited to a maximum of Rs 5 lakh, and any deposits exceeding this amount may not be fully protected.
Fixed deposits are also insured under the DICGC scheme. Similar to savings accounts, fixed deposits are covered up to Rs 5 lakh per account. This insurance coverage ensures that depositors can recover their fixed deposits up to the insured amount in case of bank-related issues.
Current account holders in India can benefit from the DICGC insurance scheme. Like savings and fixed deposits, current accounts are insured for up to Rs 5 lakh per account. This protection safeguards the funds of current account holders, providing reassurance and confidence in the country's banking system.
Recurring deposits are included in the types of deposit accounts insured by the DICGC scheme. As with the other account types mentioned, the insurance coverage for recurring deposits extends up to Rs 5 lakh per account. This coverage helps protect the interests of individuals who have made recurring deposits as a form of investment or savings.
While the DICGC insurance scheme provides valuable protection for bank depositors in India, it is important to be aware of certain limitations and exclusions. For example, deposits belonging to foreign governments, central or state governments, inter-bank deposits, and specific funds exempted by the RBI may not be eligible for this insurance coverage. Additionally, the Rs 5 lakh limit may not be sufficient for individuals with substantial savings or long-term financial commitments.
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98% of bank accounts are fully protected
In India, 98% of bank accounts are fully protected by the Deposit Insurance and Credit Guarantee Corporation (DICGC) scheme. This scheme aims to protect customer deposits of up to ₹5 lakh in each account. The insurance cover was raised from ₹1 lakh in February 2020, providing more comprehensive protection for account holders.
The DICGC scheme covers various types of deposits, including savings accounts, fixed deposits (FD), current accounts, and recurring deposits (RD). It applies to all commercial banks, including foreign bank branches, local area banks, and regional rural banks operating in India. However, it is important to note that not all deposits are insured. Exclusions include deposits of foreign and central/state governments, state land development banks, inter-bank deposits, and amounts due on deposits received outside India.
The DICGC scheme plays a crucial role in safeguarding customer deposits in the event of bank failure. In the past, account holders had to wait for years until the liquidation or restructuring of a distressed bank to retrieve their insured deposits. Now, with the recent changes in deposit insurance laws, depositors can access their insured funds of up to ₹5 lakh within 90 days, without enduring lengthy liquidation processes.
The scheme provides reassurance to depositors and strengthens the banking system's stability. It is worth noting that while the DICGC scheme offers comprehensive protection for 98% of bank accounts, depositors with amounts exceeding ₹5 lakh in their accounts have no legal recourse to recover their funds if a bank collapses. Therefore, it is advisable to diversify deposits across different banks to minimize risk.
In summary, the DICGC scheme in India provides vital protection for bank customers, ensuring that 98% of bank accounts are fully insured up to ₹5 lakh per account. This safeguard gives depositors peace of mind and bolsters confidence in the country's banking sector.
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Foreign banks in India are insured by the DICGC
Bank accounts in India are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC), which is a wholly-owned subsidiary of the Reserve Bank of India (RBI). The DICGC provides insurance protection to depositors in the event of a bank's failure, covering their deposits up to a specified limit.
Foreign banks operating in India are considered commercial banks and are indeed insured by the DICGC. This includes public, private, and foreign banks with operations in India. The insurance cover provided by the DICGC was increased to ₹5 lakh from ₹1 lakh, effective from February 4, 2020. This means that depositors are insured up to ₹5 lakh for both the principal and interest amounts held in their accounts.
The DICGC scheme aims to protect customers and encourage savings by providing insurance for deposits in savings accounts, fixed deposits, current accounts, recurring deposits, and other types of deposits. This broad coverage includes almost all types of banks, such as cooperative banks, regional rural banks, and commercial banks with their various branches.
It is important to note that the DICGC insurance does not cover all types of deposits. Exclusions include interbank deposits, deposits of foreign governments, deposits of central/state governments, and certain primary cooperative societies. However, the DICGC and RBI have undertaken efforts to increase public awareness about deposit insurance, encouraging depositors to check if their bank is covered by the DICGC.
In summary, foreign banks in India are insured by the DICGC, providing protection and confidence for depositors. The insurance covers a wide range of deposit types, ensuring that individuals and businesses can save and invest with some level of security. However, it is always advisable for customers to refer to the DICGC website and make specific enquiries to their bank regarding the protection afforded by the Corporation.
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Frequently asked questions
Yes, bank accounts in India are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC).
The insurance cover under the DICGC was raised to Rs 5 lakh from Rs 1 lakh, effective from February 4, 2020.
Savings accounts, fixed deposits (FD), current accounts, recurring deposits (RD), and other deposits are covered by DICGC's insurance.
