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What is Insurance on Bank Deposits?

Ever wondered what if your bank runs out of funds? Who would lend you money and how? In such cases, there’s a little help that the RBI offers in the form of insurance on Bank Deposits. Let’s look into it in a little detail.

The Insurance on Bank Deposits is a protection cover against the losses that might occur if the bank fails or loses its financial ability to pay back to its depositors.

This is an extremely helpful policy as it prevents individuals and especially private business firms from losing their savings or capital. It also prevents the situation of panic and helplessness among the depositors in case a bank declares its solvency.

Although your money is insured, this does not mean that it gives you the freedom to take higher risks. You still need to be very careful before handing over your life’s earnings to any bank, as we all know a little precaution is essential at every step.


Here are a few things you need to keep in mind about insurance on bank deposits:


  1. This insurance policy is offered by Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary wholly owned by the Reserve Bank Of India (RBI). The DICGC insures all the savings, fixed deposits, current deposits, recurring deposits, and various other bank deposits exceeding Rs. Five lakhs. For all the deposits above this amount, the bearer will only be able to attain Rs Five Lakhs, inclusive of the principal and the amount of interest.
  2. Under this policy, the Deposit Insurance and Credit Guarantee Corporation covers all the commercial, rural, local, co-operative and International banks operating in India required that the bank buys the cover from RBI. Rush to your bank today to ensure that your bank is insured by checking it with your branch official.
  3. The deposits made in the same bank under a similar kind of ownership are regarded as one and clubbed together while calculating or providing the claim. On the other hand, funds deposited by the same person in different banks are regarded as separate and further processing takes place accordingly. So now, you know a trick for smart banking.
  4. Although this cover cannot be withdrawn by the bank, there are certain cases under which the corporation can cancel a bank’s cover. In any such cases, the depositors are to be informed through newspapers.

Thinking why you never got to know about this policy by looking at your bank statements?

Well, this is because the insurance premium for this cover is borne entirely by the bank and is part of their responsibility to ensure a safe banking experience for their customers. Even after the bank gets liquidated, it is its responsibility to make sure each and every depositor gets the compensation on time. In no case, there is direct contact between the depositors and the RBI.

The liquidated bank prepares a claim list and submits it to the DICGC. Only after two months from the date of receipt, the depositor is liable to receive the claim which is reimbursed by the liquidated bank.

Now you can take a sigh of relief as you know that your bank has a backup! But always remember your money is your responsibility and it is you who decides its fate, Happy Banking!

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