How much of my deposit is insured by the DICGC?

Up to ₹5 lakh of your deposit in each bank is insured by the DICGC.

What happens if my bank fails?

If your bank fails, the DICGC will pay out the insured amount to you within two months.

How do I claim my insured deposit?

If your bank fails, you will need to file a claim with the DICGC. You can do this online or by mail. The DICGC will then review your claim and pay out the insured amount to you.

« How paying a small fee to your bank can save you lakhs in home-loan interest? Do the worst performing equity mutual funds beat FD? »

What is Deposit Insurance and How Does it Protect Your Money?

Q: What is the Deposit Insurance and Credit Guarantee Corporation (DICGC)?

The DICGC is a government-owned corporation that insures deposits in banks up to ₹5 lakh per depositor.

Q: What deposits are insured by the DICGC?

All deposits in banks are insured by the DICGC, except for deposits of foreign governments, 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, and any amount exempted by the DICGC with the approval of the RBI.

Posted on 15 Oct 2023
Author: Sayan Sircar

Tags: Review

9 mins read
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This article explains the concept of Deposit insurance that protects bank depositors from losing their money, up to a certain amount, if a bank fails.

What is Deposit Insurance and How Does it Protect Your Money?

📚 Topics covered:

What is Deposit Insurance for bank accounts?
What are the main features of Deposit Insurance?
Does DICGC insurance mean that I can keep up to 5 lakhs in any bank?
Which banks are covered under DICGC insurance?
Which are the safest banks in India even after DICGC insurance?

What is Deposit Insurance for bank accounts?

Deposit insurance explainer:

The Deposit Insurance and Credit Guarantee Corporation (DICGC) insures deposits in banks up to ₹5 lakh per depositor. This includes savings, fixed, current, recurring, etc. deposits. Deposits of foreign governments, 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, and any amount exempted by the DICGC with the approval of the RBI are not insured.

If a bank fails, the DICGC will pay out the insured amount to depositors within two months. The DICGC pays the money to the liquidator of the failed bank, who then distributes it to the depositors.

The DICGC is a government-owned corporation and the deposit insurance scheme is compulsory for all banks.

What are the main features of Deposit Insurance?

The main feature of DICGC insurance is:

Up to ₹5 lakhs per bank is insured per deposit holder

The main features are:

the payout amount is capped at ₹5 lakhs per bank and not per bank branch. For example, if you have ₹15 lakhs in your name in 3 branches of the same bank then only ₹5 lakhs is insured
the insurance applies based on the holding mode. If A and B are spouses, then they can have 4 different types of holdings typically: A and B separate and A + B and B + A in join mode. Each such mode is eligible for up to ₹5 lakhs
if there is more than ₹5 lakhs in the bank, the payout amount is capped at ₹5 lakhs. This amount includes both principal and interest
if a bank becomes eligible for DICGC payment, then the payment is expected to come to you in two months
this is a form of insurance and the premium is paid by the bank

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Does DICGC insurance mean that I can keep up to 5 lakhs in any bank?

DICGC payout gets triggered usually once the failed bank will get absorbed by another stronger bank or liquidation happens. For example, while the new rules say that DICGC insurance will get triggered in 2 months, there are limited examples of such early payout. Delay in return of investment reduces the final return from the investment. For a 6% FD held for 5 years, the cost of delay looks like this:

Delay in months	Effective Rate
No delay	6.000%
1	5.899%
2	5.801%
3	5.706%
4	5.615%
5	5.526%
6	5.440%
7	5.357%
8	5.276%
9	5.197%
10	5.121%
11	5.047%
12	4.976%
24	4.250%
36	3.709%
48	3.290%
60	2.956%

As a recent example, Punjab & Maharashtra Cooperative Bank Ltd (PMC Bank) depositors got back their money, up to ₹5 lakhs, in March 2022 while RBI imposed restrictions on withdrawals in September 2019.

Which banks are covered under DICGC insurance?

From the DICGC website:

Sl.No.	Bank Type	Count
1	Public Sector Banks	12
2	Private Sector Banks	21
3	Foreign Banks	44
4	Small Finance Banks	12
5	Payment Banks	6
6	Regional Rural Banks	43
7	Local Area Banks	2
8	State Co-operative banks	33
9	District Central Co-op banks	352
10	Urban Co-op banks	1484

List of Public Sector Banks

Sl.No.	Bank’s Name
1	Bank Of Baroda
2	Bank Of India
3	Bank Of Maharashtra
4	Canara Bank
5	Central Bank Of India
6	Indian Bank
7	Indian Overseas Bank
8	Punjab And Sind Bank
9	Punjab National Bank
10	State Bank Of India
11	Uco Bank
12	Union Bank Of India

List of Private Sector Banks

Sl.No.	Bank’s Name
1	Axis Bank Ltd
2	Bandhan Bank Lilmited
3	City Union Bank Ltd.
4	Csb Bank Limited
5	Dcb Bank Ltd.
6	Dhanalakshmi Bank Ltd.
7	Federal Bank Ltd.
8	Hdfc Bank Ltd
9	Icici Bank Limited
10	Idbi Bank Ltd.
11	Idfc First Bank Limited
12	Indusind Bank Ltd
13	Jammu And Kashmir Bank Ltd.
14	Karnataka Bank Ltd.
15	Karur Vysya Bank Ltd.
16	Kotak Mahindra Bank Ltd.
17	Nainital Bank Ltd.
18	Rbl Bank Limited
19	South Indian Bank Ltd.
20	Tamilnad Mercantile Bank Ltd.
21	Yes Bank Ltd.

List of Payments Banks

Sl.No.	Bank’s Name
1	Airtel Payments Bank Limited
2	India Post Payments Bank Limited
3	Paytm Payments Bank Limited
4	Fino Payment Bank Ltd
5	Jio Payments Bank Limited
6	Nsdl Payments Bank Limited

List of Small Finance Banks

Sl.No.	Bank’s Name
1	North East Small Finance Bank Ltd
2	Ujjivan Small Finance Bank Limited
3	Fincare Small Finance Bank Ltd
4	Jana Small Finance Bank Limited
5	Esaf Small Finance Bank Ltd.
6	Suryoday Small Finance Bank Limited
7	Capital Small Finance Bank Limited
8	Au Small Finance Bank Ltd.
9	Equitas Small Finance Bank Limited
10	Utkarsh Small Finance Bank Limited
11	Shivalik Small Finance Bank
12	Unity Small Finance Bank

The complete list of banks is here: https://www.dicgc.org.in/FD_ListOfInsuredBanks.html

Which are the safest banks in India even after DICGC insurance?

We are strongly of the opinion that debt investments, especially in the case of bank deposits, is the wrong place to take risk. Risk should be taken with volatile assets like equity, bonds, gold and real estate. Money kept in banks deserve absolute safety and are not the place to chase returns. Most investors who are looking for the safety of banks are doing something fundamentally wrong if they are chasing returns in a safe investment.

In this context, we will cover the concept of SIFI banks. RBI defines SBI, ICICI and HDFC as too-big-to-fail or Systematically Important (SIFI), and investors should stick to them for investment during retirement.

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