Understanding Deposit Insurance in India: All You Need to Know

Banks Insured by DICGC: A Guide to Deposit Insurance in India

In India, deposit insurance is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India (RBI). DICGC provides insurance cover to all commercial banks, local area banks, and regional rural banks that are licensed by RBI. In this blog, we will discuss the banks insured by DICGC and the key features of deposit insurance in India.

Banks Insured by DICGC

DICGC provides deposit insurance cover to all banks that are licensed by the RBI. This includes:

1. Commercial Banks – All commercial banks, including public sector banks, private sector banks, foreign banks, and cooperative banks, are insured by DICGC.
2. Local Area Banks – Local Area Banks (LABs) are small banks that operate in specific regions of the country. There are currently only a few LABs in India, and they are also insured by DICGC.
3. Regional Rural Banks – Regional Rural Banks (RRBs) are banks that are specifically set up to cater to the banking needs of rural areas. There are currently 43 RRBs in India, and they are all insured by DICGC.

Key Features of Deposit Insurance in India

1. Coverage – DICGC provides insurance cover for deposits up to a maximum of Rs. 5 lakhs per depositor per bank. This means that if a depositor has deposits in multiple branches of a bank, the total amount insured will still be Rs. 5 lakhs.
2. Types of Deposits Covered – DICGC covers all types of deposits, including savings accounts, current accounts, fixed deposits, and recurring deposits.
3. Exclusions – DICGC does not cover certain types of deposits, including deposits of foreign governments, deposits of central/state governments, deposits of the Reserve Bank of India, and inter-bank deposits.
4. Premium – Banks pay a premium to DICGC for deposit insurance. The premium rate is currently 0.05% of the total amount insured.
5. Claims Settlement – In the event of a bank failure, DICGC will settle claims within two months of the date of receipt of the claim.
6. Joint Accounts – In the case of joint accounts, the insurance cover is available to each depositor separately. For example, if a joint account has two depositors, each depositor will be insured up to Rs. 5 lakhs separately.

In addition to the key features of deposit insurance in India, there are a few more things that depositors should be aware of when it comes to deposit insurance.

1. Nomination Facility – Banks offer a nomination facility to depositors, which enables them to nominate a person who will receive the money in case of their death. In the case of a nominee, DICGC will make payment to the nominee only after verifying the death of the depositor.
2. Validity of Insurance Cover – DICGC insures deposits only up to a maximum of Rs. 5 lakhs per depositor per bank. Therefore, it is essential to ensure that the total amount of deposits with a bank does not exceed Rs. 5 lakhs. If the deposits exceed the limit, the excess amount will not be covered under deposit insurance.
3. Coverage in Case of Bank Merger – In case of a merger between two banks, depositors should note that the deposit insurance cover is transferred to the merged entity. This means that if the merged entity is insured by DICGC, the deposit insurance cover for depositors will continue to be valid after the merger.
4. Bank Failure – In the event of a bank failure, DICGC will settle the claims of depositors up to a maximum of Rs. 5 lakhs per depositor per bank. However, it is important to note that the time taken for the settlement of claims may vary depending on the complexity of the case.

Conclusion

In conclusion, deposit insurance is an important feature of the Indian banking system that provides a safety net to depositors. DICGC provides insurance cover to all licensed banks in India, and depositors should ensure that their deposits are within the insured limit and spread across different banks to minimize the risk of loss in the event of a bank failure. It is also essential to be aware of the key features and exclusions of deposit insurance to make informed decisions regarding deposit investments.

Read more useful content:

• How to invest in mutual funds
• All about mutual funds-types & importance
• The Power of SIP Investment in Mutual Funds