DICGC Insures Up to ₹5 Lakh Per Depositor Per Bank, Covering Principal and Interest

The Deposit Insurance and Credit Guarantee Corporation, known as the DICGC, insures bank deposits in India. Its cover is up to ₹5 lakh for each depositor in each bank. The limit covers principal and interest combined and applies to a depositor's total across the accounts held in the same capacity at that bank.

It is triggered when a bank is liquidated, merged or reconstructed, or when the Reserve Bank of India (RBI) issues directions that block depositors from accessing their money. RBI also issues directions that cap withdrawals from some banks, and those are set out in a later section.

Which Banks and Deposits Are Covered

The DICGC's FAQ lists commercial banks, including branches of foreign banks in India, local area banks and regional rural banks, as insured. It also covers cooperative banks. The FAQ says all cooperative banks are currently covered, provided their state has amended its cooperative law as required. Primary cooperative societies are not insured.

Savings, fixed, current and recurring deposits are covered. Excluded are deposits of foreign governments and of central or state governments, inter-bank deposits, amounts due on deposits received outside India, and any amount the DICGC exempts with RBI's prior approval.

The DICGC's guide also lists products that fall outside the cover altogether. These are deposits with non-banking financial companies, Land Development Bank deposits, mutual funds, stocks, bonds, exchange-traded funds and cryptocurrencies.

The premium is borne entirely by the insured bank, as the DICGC's guide states, so depositors do not pay it. Each insured bank receives printed leaflets from the DICGC, and the RBI's FAQ advises depositors who are unsure of a bank's status to ask at the branch.

How the ₹5 Lakh Limit Is Applied

RBI's press release says the cover was raised from ₹1 lakh to ₹5 lakh per depositor with effect from 4 February 2020, with the approval of the Government of India.

The limit applies per depositor per bank, not per account. Deposits at all branches of one bank are added together. A depositor with a savings account, a fixed deposit and a current account at the same bank, all in the same capacity, shares one ₹5 lakh limit. Deposits at different banks are insured separately.

Different capacities get separate limits. The guide gives a partner, guardian, director or trustee as examples, along with joint accounts. A joint account is combined with other holdings only when the account holders appear in the same order. A joint account with the names in a different order is insured separately. A sole proprietorship is combined with the owner's individual deposits.

Interest counts toward the limit. The FAQ's example is ₹4,95,000 of principal plus ₹4,000 of interest, which is fully insured at ₹4,99,000. If principal alone is ₹5,00,000, the accrued interest is not insured. The balance is measured on the date of liquidation or cancellation, the date a merger or reconstruction takes effect, or the date All-Inclusive Directions are imposed. Claim amounts are worked out after set-off of loans and advances, as of the cut-off date.

The DICGC's FAQ says the joint-account rule was revised with effect from 26 April 2007. The RBI's FAQ gives a sample case of three individuals, A, B and C. Joint accounts in which their names appear in the same order are combined under one ₹5 lakh limit, while accounts with the names in a different order, such as C, B and A, are insured separately.

How Fast DICGC Payouts Must Be Made

The timeline depends on how the bank is resolved. In a liquidation, the liquidator prepares a depositor-wise claim list and sends it to DICGC. DICGC pays the liquidator within two months of receiving the list, and the liquidator then pays depositors. DICGC does not pay depositors directly.

In a reconstruction or amalgamation, DICGC pays the bank the difference between the full deposit or the insurance limit in force at the time, whichever is less, and what the depositor receives under the scheme, again within two months of receiving the claim list. The guide says that in a merger, amounts for depositors are paid to the transferee bank.

Under Section 18A of the DICGC Act, effective 1 September 2021, once RBI has imposed All-Inclusive Directions on a bank, the bank must submit its depositor list within 45 days. DICGC then verifies the claims within 30 days of receiving them and pays within 15 days after verification. The total from the directions to payment must not exceed 90 days. A late or missing list can stop DICGC from settling claims for that bank.

Depositors submit a signed willingness form, with attested officially valid documents, to the bank's chief executive or administrator. The DICGC's FAQ says there is no cut-off date for submitting the form while the bank remains under All-Inclusive Directions.

The ₹5 lakh limit applies per depositor per bank, not per account.

What an RBI Withdrawal Cap Means for Depositors

RBI can restrict a specific bank through directions that limit what it can do and how much depositors can take out. In March 2023, for example, RBI directed Pune Sahakari Bank Ltd. to allow depositors to withdraw up to ₹10,000 from their total balance across savings, current or other accounts. The directions took effect at the close of business on 10 March 2023 and were to remain in force for six months, subject to review.

The same directions barred the bank from granting or renewing loans, making investments, or taking on new liabilities, including borrowings and fresh deposits, without RBI's prior written approval. They also covered disbursing payments and selling or otherwise disposing of property or assets, except as notified in the RBI direction. The RBI release says the directions should not per se be construed as cancelling the bank's banking licence, and the bank continues to operate under restrictions until its financial position improves.

The Pune release says eligible depositors can claim up to ₹5 lakh from DICGC under Section 18A of the DICGC Act if they indicate willingness to do so. The DICGC guide says that where RBI directions prevent depositors from accessing their deposits, DICGC's liability arises under Section 16 of the Act. The Pune release says depositors may contact their bank for further information, and details are also available on the DICGC website.

When Cover Ends: Cancellation and De-registration

The DICGC may cancel a bank's registration if the bank fails to pay premium for three consecutive periods, and it publicises such withdrawals in newspapers. Registration is also cancelled if a bank is barred from accepting fresh deposits, loses or is refused its licence, is wound up, or stops being a banking company or cooperative bank under Section 36A(2) of the Banking Regulation Act, 1949. It is also cancelled if the bank transfers all its deposit liabilities elsewhere, or is amalgamated with another bank, or is subject to a compromise or reconstruction scheme that does not permit fresh deposits. Deposits remain covered up to the cancellation date.

The amount payable afterwards depends on the reason. If the bank is de-registered because of a bar on fresh deposits, or because its licence was cancelled or refused, the DICGC's liability is limited to deposits held on the cancellation date. For other reasons, such as non-payment of premium or a cooperative bank ceasing to be eligible under Section 2(gg) of the DICGC Act, the guide says the DICGC has no liability.