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Good news for bank customers! Centre mulling over to increase DICGC insurance cover above ₹5 lakh
The Centre is considering raising the DICGC insurance cover for bank depositors above ₹5 lakh, enhancing protection for customers' funds in case of bank failures. Currently, DICGC covers up to ₹5 lakh per depositor.
The Centre is mulling over increasing Deposit Insurance and Credit Guarantee Corporation (DICGC) insurance cover above ₹5 lakh for bank depositors, said the Department of Financial Services Secretary M Nagaraju on Monday.
The move will provide better protection to bank customers' deposited money if the bank goes bankrupt.
The Reserve Bank of India owns DICGC and provides insurance coverage to depositors. The RBI's subsidiary currently protects bank deposits of up to ₹5 lakh for every bank account holder.
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How does DICGC work?
The DICGC is an RBI subsidiary backed by the central government. It protects banks' small depositors if the financial institution faces insolvency or bankruptcy.
DICGC provides insurance cover up to ₹5 lakhs per depositor per bank. Its insurance covers savings accounts, fixed deposits, current accounts, and recurring deposits.
DICGC receives premiums from banks for insurance coverage. It covers all commercial banks, including branches of foreign banks operating in India. DICGC insurance also includes local area branches, regional rural banks, etc.
What happens to bank deposits when a bank fails?
If a bank faces insolvency or bankruptcy, DICGC ensures that depositors are reimbursed up to the insured limit, i.e., ₹5 lakhs, for their bank deposits within three months.
In case of insolvency or bankruptcy, the DICGC will pay a maximum of ₹5 lakh, including interest and principal, to account holders whose bank deposit amount is ₹5 lakh or above.For bank account holders who have deposited money less than ₹5 lakh, DICGC will reimburse the full amount.
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In 2021, the Centre allowed customers of failed or stressed banks, which are placed under moratorium, to get their deposits back within 90 days start of moratorium. Bank customers can claim their deposit amount (up to ₹5 lakh) under the deposit insurance scheme of the Deposit Insurance and Credit Guarantee Corporation (DICGC).
Before the Deposit Insurance and Credit Guarantee Corporation (Amendment) Act 2021, it would take years for depositors to receive their money in case their bank faces insolvency or bankruptcy.
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Business NewsIndustryBankingGood news for bank customers! Centre mulling over to increase DICGC insurance cover above ₹5 lakh
First Published:17 Feb 2025, 01:57 PM IST
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