The most common and popular form of deposit among us which is considered to be the only safe instrument in India is quite shaken, After the recent #PMCBank scene and #YesBank.
Most of us know that only Rs 1 lakh of the bank deposit is guaranteed, But how does it works when do they give the insurance amount?, How they will settle if you have multiple accounts in the same bank or a different branch of the same bank? What about the current account and money lying in a joint account? How to find if your bank is insured or not?
These are some of the questions which is currently in our mind. So let us see how this question gets unfolded.
Deposit Insurance- What is all About?
In simple terms deposit insurance is the protection given to the deposits in the bank in full or part, in the event of a bank’s inability to pay it back. This measure is adopted in many countries to provide confidence to the public at large that their deposits are safe with the bank.
In India, this Guarantee is provided by “Deposit insurance and Credit Guarantee Corporation” (DICGC), under the framework and regulations provided by RBI.
DICGC is the safety net for bank deposits in India.
Which all institution are covered under DICGC Insurance?
Except for NBFC’s deposits and Mutual Funds investment, almost all commercial banks, Foreign banks, co-operative banks, regional rural bank and all eligible state co-operative banks all are covered under insurance.
What is the maximum eligible amount?
The maximum eligible amount is MAXIMUM UPTO 1 LAKH ONLY per depositor. It does not differentiate between your deposit and interest. The balance of principal together with interest to each depositor is settled by DICGC with a maximum ceiling of Rs 1 lakh.
What kind of deposit accounts are covered under Bank Deposit Insurance?
All types of deposits, be it fixed, saving, recurring, etc. are covered under this scheme. ExceptDeposits by Governments – State/Central/Foreign
Interbank deposits
Deposits of State land Development banks with State Cooperative Banks
Any amount due on account of and deposit Received outside India
Any amount specifically exempted by DICGC with prior approval of RBI
How many Account can be insured?
If an individual opens many accounts in different branches of the same bank then it will be considered as one account for insurance. It is important to note that, if the deposits are held in a different capacity then all deposits are insured up to Rs 1lakh.
Can deposit insurance be increased by depositing funds into several different accounts all at the same bank?
All funds held in the same type of ownership at the same bank are added together before deposit insurance is determined. If the funds are in different types of ownership or are deposited into separate banks they would then be separately insured.
Can the bank deduct the amount of dues payable by the depositor?
Yes. to find the net amount of each customer Banks has the right to set off their dues pending from the amount of deposits. The deposit insurance is available after netting of such dues.
Can the DICGC withdraw deposit insurance coverage from any bank?
The Corporation may cancel the registration of an insured bank if it fails to pay the premium for three consecutive periods. In the event of the DICGC withdrawing its coverage from any bank for default in the payment of premium, the public will be notified through newspapers.
How will you know whether your bank is insured by the DICGC or not?
The DICGC while registering the banks as insured banks furnish them with printed leaflets for display giving information relating to the protection afforded by the Corporation to the depositors of the insured banks. In case of doubt, the depositor should make a specific enquiry from the branch official in this regard. Or you can see the list of the registered bank from Website. https://www.dicgc.org.in/FdLibCommercialBanks.aspx
Conclusion
It is wise to be prepared and have a diversified approach in case of deposits and investments. You can approach to have some safe liquid or ultra-short mutual funds and just change bank account in a mutual fund when such fiasco happens.
I am sure you also found Rs 1lakh as deposit insurance is too less and in comparison to global, it is considered to be the lowest in the world.
UPDATE: From Feb 5,2020 onwards Deposit Insurance and Credit Guarantee Corporation has enhanced the limit of Rs.1 Lakh insurance to Rs 5 Lakh to any one depositor in respect of his/her deposits with the insured bank.
Never put all your eggs in one basket
