Bank deposits are generally considered safe investment options, but in the rare event of bank failure, not all deposits may be fully protected. According to reports from Mint, deposit insurance in India is provided under the Deposit Insurance and Credit Guarantee Corporation (DICGC), which operates under the Reserve Bank of India (RBI) framework. Each depositor is insured up to ₹5 lakh per bank, covering both principal and interest across different types of accounts including savings, fixed, current, and recurring deposits.
As reported by Mint, all deposits held by a person in the same bank are aggregated for insurance purposes, regardless of the number or type of accounts. The total balance across savings, current, and fixed deposit accounts is treated as a single amount, with insurance coverage capped at ₹5 lakh per person per bank. The DICGC does not insure deposits belonging to foreign governments, central or state governments, inter-bank deposits, and state land development banks with state cooperative banks. It also excludes deposits held outside India or amounts specifically exempted by the corporation with prior RBI approval.
According to RBI guidelines reported by Mint, deposit insurance applies separately for each bank. If a person has spread their money across multiple banks, each bank receives its own ₹5 lakh coverage, which would protect funds across different institutions. In joint accounts, each holder is treated as a separate depositor, with insurance coverage calculated individually for each person, though the ₹5 lakh limit still applies per depositor per bank.
As reported by Mint, the DICGC cover does not apply to various financial assets including mutual funds, shares of companies, insurance policies, cryptocurrencies, and any market-linked investments. The coverage is strictly limited to bank deposits, excluding all other investment instruments and financial products.
During bank liquidation, the liquidator prepares depositor-wise claim lists and sends them to the DICGC for scrutiny and payment, according to Mint reports. The DICGC pays insurance amounts to the liquidator who is liable to pay depositors. In cases of bank amalgamation or merger, the amount due to each depositor is paid to the transferee bank. The DICGC provides printed leaflets to insured banks for display, and depositors can verify coverage by making specific enquiries from branch officials.
