Bank Deposit Insurance

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🌀Bank Deposit Insurance🌀
I have often been asked about the safety of bank fixed deposit by savers and if their deposit is insured against default. In this post we tell you about Bank Deposit Insurance and discuss tips and tricks to use the deposit insurance the best way.
1. Bank Deposit Insurance is covered by Deposit Insurance and Credit Guarantee Corporation (DICGC) which is subsidiary of RBI.🔅
2. The maximum deposit insurance cover is for Rs 1 lakh per customer per bank.🔆
3. The insurance premium is paid by banks and depositors are not charged for the same.🔆
4. The Deposit insurance was introduced in 1962 and the maximum cover was Rs 1,500.🔅
5. The Rs 1 Lakh limit was set in year 1993 and has not been revised for 23 years. Assuming modest 6% inflation the insurance amount should have been raised to Rs 4 Lakhs. I hope RBI is listening!🔅
6. Earlier the insurance amount was revised regularly. Here is the deposit Insurance over the years:🔅
1962: Rs. 1,500
1968 : Rs.5,000
1970 : Rs.10,000
1976 : Rs.20,000
1980 : Rs.30,000
1993 : Rs.1,00,000
7. Understanding 1 Lakh limit: The 1 lakh limit covers all your deposit with the bank in form of savings account, fixed deposit, current account, recurring deposit, etc. and any interest accrued. For e.g. If you have Rs 10,000 in your savings account and Rs 85,000 in fixed deposit and Rs 9,000 as interest due on your fixed deposit – you would still get Rs 1 Lakh even though your total amount due was Rs 1.04 lakhs (10,000 + 85,000 + 9,000).🔅
8. The Rs 1 lakh deposit insurance covers each bank and it does not treat different branch of the same bank separately. So if you have Fixed deposit of Rs 90,000 in SBI, Delhi and Rs 75,000 in SBI, Gurgaon – in case of bank default you would be paid Rs 1 Lakh only – as the deposit insurance is at bank level and not branch level. In a different scenario if you have Rs 90,000 FD with SBI, Delhi and Rs 75,000 FD with ICICI bank, Delhi – in case of both bank defaults – you would be paid separately for both i.e. Rs 90,000 for SBI and Rs 75,000 for ICICI.🔆
9. The amount paid to depositor would be net of any dues payable to the bank. For e.g. as in the case above if you had to pay bank Rs 20,000 personal loan. You would be paid back Rs 1,04,000 – 20,000 = Rs 84,000 only.🔆
10. The DICGC is liable to pay the insurance amount within two months of receiving the depositors list from the bank.🔆
11. As of today all banks including commercial banks, local area banks, rural banks, foreign bank branches and co-operative banks in India, are covered under this scheme of DICGC except the co-operative banks of Meghalaya, Chandigarh, Lakshadweep and Dadra & Nagar Haveli.🔆
12. There are some banks which are de-registered. You can get the list on DICGC website. Almost all these banks are co-operative banks which is a huge risk.🔆
13. The insurance is based on “same right and same capacity” as on the date of bank default.🔅

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