Back
Deposit Insurance Coverage in India
Banks are institutions that are trusted by millions of depositors to safeguard their money. While banks are designed to be secure, they can face instability due to various reasons such as bad management, defaulting loans, or economic downturns. When banks fail, it hurts the depositors because it puts their savings at risk. Out of concern to protect the depositors, to ensure their financial stability, and to retain trust in the banking system, the government introduced deposit insurance in India.
Banks Insured under Deposit Insurance and Credit Guarantee Corporation (DICGC)
The DICGC insures all depositors’ money placed in commercial as well as foreign banks operating in India. The coverage is extensive and includes:
- Local Area Banks
- Public and Private Sector Banks
- Payment Banks
- Small Finance Banks
- Regional Rural Banks
- Cooperative Banks
Note: This coverage is applicable only if the concerned bank has registered and opted for the DICGC cover.
How Does the Coverage Work During a Moratorium?
In the unfortunate event that a bank falls under a moratorium and its activities are suspended or frozen, the insurance coverage remains effective to protect depositors.
- First 45 Days: All necessary information regarding deposits and accounts is reviewed.
- Next 45 Days: Claims are processed and settled.
This ensures that customers whose accounts are frozen can get access to their funds up to the insurance limit within a stipulated timeframe, a relief measure emphasized in recent Union Budgets to aid depositors in distress.
Premium Rates and Costs
The cost of this insurance is borne by the banks, not the depositors. As per current regulations, the premium paid by banks to the DICGC is 12 paise per ₹100 of assessable deposits per annum. While this rate is subject to change based on the financial climate and decisions by the Government and the RBI, it ensures a robust safety net is maintained.
What Does DICGC Not Cover?
While the personal loan sector operates on lending, deposit insurance is strictly about protecting savings. However, not all deposits are covered. The Deposit Insurance and Credit Guarantee Corporation does not cover:
- Deposits of foreign governments.
- Deposits of Central/State Governments.
- Inter-bank deposits.
- Deposits of the State Land Development Banks with the State Co-operative Bank.
- Any amount due on account of and deposit received outside India.
- Any amount which has been specifically exempted by the corporation with the previous approval of the Reserve Bank of India.
Conclusion
Banks registered with DICGC are provided with a printed certificate, which they are expected to display prominently on their premises and websites. This transparency helps depositors verify that their hard-earned money is protected against bank failure. By understanding these protections, you can bank with greater confidence and peace of mind.
