Deposit Insurance in India

The idea behind the Deposit Insurance is to boost the faith of the public in the banking system, and provide protection against the loss of deposits to a significant extent. In India, the bank deposits are covered under the insurance scheme provided by Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly owned subsidiary of the Reserve Bank of India. DICGC is a statutory body, created by an act of parliament in 1961.

Which banks are covered under Deposit Insurance Scheme?

All commercial & cooperative Banks (state, district and Urban cooperative banks) are insured by DICGC; however there are a few exceptions. The following are not covered under deposit insurance scheme:

• Primary Agricultural Credit Societies (PACS)
• Cooperative banks from Meghalaya
• Cooperative Banks from Union Territories of Chandigarh, Lakshadweep and Dadra and Nagar Haveli.

This implies that:

• All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks are insured by the DICGC.
• All State, Central and Primary cooperative banks, also called urban cooperative banks, functioning in States / Union Territories are covered under the Deposit Insurance System.
• At present all co-operative banks other than those from Meghalaya, Chandigarh, Lakshadweep and Dadra and Nagar Haveli are covered under the deposit insurance system of DICGC.

Primary cooperative societies (PACS) , which are village level cooperatives and disburse short term credits in the country are NOT insured by the DICGC. So around 95000 PACS in the country are out of coverage of the DICGC.

What kinds of deposits are insured?

The DICGC insures all deposit accounts including savings, fixed, current, recurring, except:

• Deposits of the Foreign Governments
• Deposits of the Central and State Governments.

How deposit Insurance works?

When a bank covered by Deposit insurance scheme of DICGC fails, or undergoes liquidation or is merged with another bank; the DICGC pays the amount due to depositors via the officially appointed liquidator in a time bound manner. All claims are settled by DICGC within two months from the receipt of the claim from the liquidator.

What is maximum amount insured under deposit insurance?

The maximum amount per depositor insured is Rs. 1 Lakh including Principal and Interest. This means that

• If a person has principal amount of Rs. 91000 and interest Rs. 7,000 then the amount insured by DICGC is Rs. 98,000.
• However, if the same person has deposits Rs. 98000 and interest  is Rs. 8000 then , the amount insured by the DICGC would be Rs. 1 Lakh.

The insurance cost is borne by the bank which is insured. The DGCIC charges 10 paise per Rs. 100 as insurance premium.

If a person has different accounts in different branches of the same bank, then the deposits in different branches are totalled and the maximum cover of ₹1-lakh is applied. In case of the joint accounts and other accounts one had, all deposit accounts one holds in his / her name in the same bank are clubbed together to apply the maximum cover. This implies that if someone has savings, fixed, current and recurring deposit accounts in different branches of the bank, he / she will get only Rs. 1 Lakh if the bank fails. However, if one maintains deposits in different capacities in different banks; the Rs. 1 Lakh limit is applied separately for each bank.