The Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the Reserve Bank of India (RBI), provides insurance coverage of up to Rs 5 lakh per depositor per bank against bank savings and current accounts, fixed deposits, recurring deposits, etc., in case of a bank failure. The coverage includes the principal and interest amount, subject to the limit. In 2023-24, the number of banks that subscribed to the DICGC scheme stood at 1,997, down from 2,026 in 2022-23, according to RBI’s “Handbook of Statistics on the Indian Economy” report.

What Does DICGC Cover?

As per RBI, all commercial banks, including public and private sector banks, foreign banks, regional rural banks, state cooperative banks, district central cooperative banks, and urban cooperative banks, are covered. Each depositor gets an insurance cover of up to Rs 5 lakh on deposits in savings, current, fixed, and recurring accounts per bank. If a bank goes bankrupt, DICGC will return the depositors’ money as defined under the scheme.

If the depositor has multiple accounts in the same bank with deposits exceeding Rs 5 lakh, even then the insurance cover will remain the same. However, if the depositor holds accounts in more than one bank, the limit will apply to each individual bank accounts.

DICGC’s Insurance Coverage Over The Years

Number of Banks: The number of banks under the scheme has been declining in recent years possibly due to the higher number of deregistration than registration. The mergers and acquisitions of banks may have also led to a fewer number of banks. Non-compliance of regulatory requirements can result in deregistration from the DICGC scheme. The exit of the smaller and non-competitive banks from the market may have also resulted in a reduced number of banks under the scheme.

Premiums: The trend shows that in 2001-02, the total premium was Rs 635 crore, which reached to Rs 23, 879 crore by 2023-24, reflecting significant growth in the banking insurance sector. The premiums from commercial banks grew from Rs 556 crore in 2001-02 to Rs 22,543 crore in 2023-24. The premium growth in co-operative banks was lower than the commercial banks but grew from Rs 79 crore in 2001-02 to Rs 1,336 crore in 2023-24. This growth has been due to the expansion of commercial banks and strengthening of the framework.

How Depositors Should Strategise Bank Deposits?

Depositors can keep their money in different banks instead of keeping it all in one bank for better protection against default risks, especially if it is a smaller financial entity.