What is Deposit Insurance and how many bank accounts fall under Rs. 5 lakh insurance cover? Check if your deposit is protected
In a piece of bad news, the Reserve Bank of India (RBI) in its latest annual report revealed that around 4.8 crores of the total number of bank accounts in India do not enjoy the deposit insurance cover offered by Deposit Insurance and Credit Guarantee Corporation (DICGC).
The total insured deposits, as per RBI, stood at Rs. 76,21,258 which is only 50.9% of the assessable deposits of Rs. 1,49,67,776 crore. This, in turn, means that 49.1% of the amount deposited with banks do not enjoy the DICGC cover.
The number of fully protected bank accounts in India stood at 247.8 crores of a total of 252.6 crores in March 2021. This means that 98.1% of the total number of banks accounts in India are protected.
Earlier, in 2020, the insurance cover offered by the DICGC has raised from Rs. 1 lakh to Rs. 5 lakh. The aforementioned cover is available to all the banks, provided they have registered for this facility and paid the corresponding insurance premium to continue enjoying the financial protection.
What is insurance cover offered by the DICGC?
Every year, banks pay a premium amounting to 0.001% of their deposits to DICGC to enjoy the insurance cover. This means that if a bank fails, your hard-earned money (Rs. 5 lakh insured amount) will not go in vain.
Let us understand this with the help of an example:
Case 1: If you hold a total deposit of Rs. 25 lakh in the same bank in the same right and capacity, only Rs. 5 lakh will be insured while the remaining Rs. 20 lakh deposit will not be insured.
Case 2: If you hold a total deposit of Rs. 25 lakh in the same bank but with different rights. Let's say you hold a personal account in your name, another account as a partner in a partnership, another account as the guardian of a minor, these accounts will be treated as a different account with different capacity and will receive separate insurance payouts of Rs. 5 lakh each.
Thus, in order to maximise your insured amount, diversify your deposits across multiple bank accounts and hold accounts in different capacities.
How many banks have gone bust in India?
The RBI in its latest annual report revealed that five Cooperative Banks and one Local Area Bank were liquidated during 2020-21.
As per several reports, the DICGC has processed claims totalling Rs. 993 crores during the year 2020-21 to ensure payment to insured depositors of liquidated banks. Out of the total amount processed, the DICGC has settled claims amounting to Rs. 564 crores in respect of nine co-operative banks during 2020-21.
How to check if your bank is protected or not?
In order to check if your bank account is protected or not, head to https://www.dicgc.org.in/FD_ListOfInsuredBanks.html
As per DICGC, 12 Public Sector Banks, 22 Private Sector Banks, 46 Foreign Banks, 10 Small Finance Banks, 6 Payment Banks, 45 Regional Rural Banks, 2 Local Area Banks, 33 State Co-operative Banks, 351 District Central Co-op Banks, and 1537 Urban Co-op banks are insured.