DICGC deposit insurance: what is covered and how to protect your savings

What DICGC is

The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a subsidiary of the Reserve Bank of India. It insures deposits held in commercial banks, small finance banks, payments banks, regional rural banks and cooperative banks that are registered with it.

If an insured bank is liquidated or its licence is cancelled, DICGC pays depositors up to the insured limit. Those payouts are made within a set time frame under current rules, rather than waiting for the bank's long liquidation process.

How much is covered

At the time of writing, the cover is 5 lakh rupees per depositor per bank. That single limit is the total for principal and interest across all your accounts in the same bank and in the same capacity, including savings, current, fixed and recurring deposits.

The key phrase is "per bank". If you hold 8 lakh rupees in one bank, only 5 lakh is insured. If you hold 4 lakh in each of two different banks, all 8 lakh is covered. The limit has been raised before, so confirm the current figure on the DICGC website.

What it does not cover

• Money above the insured limit in a single bank, in the same capacity.
• Deposits of foreign governments, and inter-bank deposits.
• Investments such as mutual funds, shares and bonds, which are not bank deposits.
• Deposits with institutions that are not registered with DICGC, such as most non-bank finance companies. A high-rate deposit at such a company is not insured in the same way.

Different capacities count separately

The limit applies separately to deposits held in different rights and capacities. For example, a single-name account, a joint account and an account where you are a guardian for a minor can each qualify for their own cover in the same bank. The rules are specific, so read them before relying on this to protect a large sum.

What this means in practice

• If your savings in one bank are within the insured limit, deposit insurance protects them regardless of the bank.
• If you hold more than that, consider spreading across banks so that each balance stays within the cover.
• A higher interest rate from a smaller institution may reflect higher risk. Compare the extra return against the risk you are taking on money above the insured limit.
• Check that a bank or small finance bank is covered by DICGC before you deposit.

A note on judgement

Deposit insurance is a safety net, not a reason to ignore a bank's health. Rates on the Truely Money lists are ranked by interest rate, and a very high rate is worth a second look at who is offering it. This is general information, not personal financial advice.