Bank customers often hear that deposits are “insured up to ₹5 lakh.” That statement is broadly correct, but it can be misunderstood.
The limit is not ₹5 lakh for every savings account, fixed deposit or bank branch. Deposit insurance is normally calculated for each depositor at each insured bank after eligible accounts held in the same right and capacity are combined.
This guide explains how Deposit Insurance and Credit Guarantee Corporation (DICGC) protection works, which deposits are covered, how joint and multiple accounts are treated, and what depositors should do if a bank faces restrictions.
What Is DICGC?
DICGC is a wholly owned subsidiary of the Reserve Bank of India. It administers India’s deposit-insurance system and provides limited protection to eligible depositors when an insured bank is liquidated, loses its licence, undergoes an applicable reconstruction or amalgamation, or is placed under qualifying withdrawal restrictions.
The current insurance ceiling is ₹5 lakh per depositor per bank for deposits held in the same right and same capacity. The ceiling includes both principal and accrued interest.
Customers do not purchase this protection as an individual insurance policy. Insured banks pay the applicable premium to DICGC.
DICGC Deposit Insurance: Quick Facts
| Question | Current rule |
|---|---|
| Maximum insurance | ₹5 lakh per depositor per insured bank |
| Does the limit include interest? | Yes, principal and accrued interest are combined |
| Savings, current, fixed and recurring deposits | Covered when eligible and held with an insured bank |
| Different branches of one bank | Deposits are combined |
| Different insured banks | The limit applies separately to each bank |
| Several accounts in one name | Normally combined when held in the same right and capacity |
| Mutual funds, shares and insurance policies | Not covered by DICGC deposit insurance |
Which Banks Are Covered?
DICGC coverage generally extends to commercial banks, public- and private-sector banks, small finance banks, regional rural banks, local area banks, Indian branches of foreign banks and eligible cooperative banks.
A familiar name, banking application or attractive interest rate is not sufficient proof of coverage. Before placing a significant deposit, check the current DICGC list of insured banks and the bank’s official website.
A financial application may distribute deposits through partner banks. The relevant institution is the bank legally accepting and recording the deposit—not merely the application through which the investment was initiated.
Which Deposits Are Insured?
Eligible deposits generally include:
- Savings-account balances
- Current-account balances
- Fixed or term deposits
- Recurring deposits
- Accrued interest within the overall insurance ceiling
The insurance limit applies to the eligible balance as of the relevant cut-off date, such as the date of licence cancellation, liquidation, an applicable reconstruction, or the imposition of qualifying All-Inclusive Directions.
Principal and interest example
Suppose a depositor has a fixed-deposit principal of ₹4,80,000 and accrued interest of ₹30,000. The total eligible balance is ₹5,10,000, but the maximum insurance amount would be ₹5 lakh.
Interest is not separately excluded. It is included but shares the same ₹5 lakh maximum with the principal.
The Most Important Rule: Per Depositor, Per Bank
DICGC cover is applied separately to each insured bank.
| Deposits | Combined eligible balance | Maximum DICGC cover |
|---|---|---|
| ₹3 lakh savings and ₹2 lakh FD at Bank A | ₹5 lakh | ₹5 lakh |
| ₹3 lakh savings and ₹4 lakh FD at Bank A | ₹7 lakh | ₹5 lakh |
| ₹4 lakh at Bank A and ₹4 lakh at Bank B | Assessed separately | Up to ₹4 lakh at each bank |
| ₹4 lakh at two branches of Bank A | ₹8 lakh combined | ₹5 lakh |
| ₹5 lakh principal plus ₹25,000 interest at Bank A | ₹5.25 lakh | ₹5 lakh |
Deposits in different insured banks receive separate limits. Deposits in different branches of the same bank are aggregated.
Several Accounts at the Same Bank
Opening several accounts does not by itself increase coverage. If one person holds a savings account of ₹1.5 lakh, a recurring deposit of ₹1 lakh, a fixed deposit of ₹3 lakh and accrued interest of ₹25,000 at the same bank, the accounts are generally combined.
The combined balance is ₹5.75 lakh, but the maximum insured amount is ₹5 lakh. Moving one deposit to another branch of the same bank does not create a new limit.
What Does “Same Right and Same Capacity” Mean?
Accounts belonging to the same person in the same legal ownership category are normally aggregated. A person may also hold money in a legally different capacity, such as an individual depositor, partner of a firm, guardian of a minor, trustee, company representative or joint-account holder.
Deposits genuinely held in different rights or capacities may be assessed separately. Changing the name printed on an account without changing its underlying legal ownership does not necessarily create separate insurance.
Because trusts, partnerships, proprietorships and guardianship accounts can involve legal distinctions, depositors should obtain written clarification from the bank for a large or complex balance.
How Are Joint Accounts Treated?
When several joint accounts contain the same people in the same order, their balances are generally combined. For example, two accounts titled Anil–Beena would normally be treated as accounts held in the same capacity and right.
An account held as Beena–Anil may be treated differently because the order of names has changed. An account held by Anil–Charan also has a different combination of holders.
However, joint-account arrangements should not be created merely on the assumption that every variation guarantees separate payment. DICGC will examine the legal account records and applicable rules.
What Is Not Covered?
Statutory exclusions identified by DICGC include deposits of foreign governments, Central or State governments, inter-bank deposits, deposits received outside India, and amounts specifically exempted with prior RBI approval.
DICGC also does not insure investments merely because they were purchased through a bank. These include:
- Mutual-fund units
- Shares and exchange-traded funds
- Bonds held as investments
- Insurance or pension products
- Gold or cryptocurrency
- Deposits with an unregulated entity
- Company or NBFC deposits that are not legally held with an insured bank
What about NBFC fixed deposits?
A fixed deposit issued by a non-banking financial company is not automatically a bank deposit. Check the legal issuer named on the deposit receipt rather than relying on the word “FD” in an advertisement.
What Happens If an Insured Bank Fails?
Bank liquidation or licence cancellation
When an insured bank is liquidated or its registration is cancelled, the eligible amount is calculated using deposit records as of the applicable cut-off date. DICGC normally settles the admissible amount through the liquidator or another authorised channel after ownership, account aggregation, permitted set-off and KYC information are verified.
Bank placed under All-Inclusive Directions
RBI can place a stressed bank under All-Inclusive Directions (AID), restricting withdrawals while its position is addressed.
Section 18A of the DICGC Act provides a time-bound mechanism for eligible interim insurance payments. The framework allows settlement within a period not exceeding 90 days, subject to the insured bank submitting depositor information within the statutory timeline and depositors completing the required willingness and KYC process.
The 90-day framework should not be presented as an unconditional promise that every customer will receive money exactly 90 days after first hearing about a problem.
Does the Depositor Need to File a Claim?
The exact procedure depends on the bank’s regulatory status. For a bank under AID, DICGC may provide a facility through which eligible depositors submit their willingness to receive the insured amount. Submission does not itself guarantee immediate payment. The bank must verify KYC and claim details.
Depositors may be asked to provide or confirm account information, identity and address details, mobile number, receiving bank details, KYC documents, claim declarations, loan information and nominee or legal-heir documents where applicable.
Use only the bank’s and DICGC’s official communication channels.
What If the Depositor Has a Loan with the Bank?
Eligible dues may be set off before the insured amount is determined. A simple account balance may therefore not always equal the final payable amount. Customers with deposits and loans at the same stressed bank should preserve both sets of records.
How to Check Whether a Bank Is DICGC-Insured
- Identify the legal name of the bank.
- Visit the official DICGC website.
- Open the list of insured banks.
- Search for the exact institution.
- Check whether a cancellation or deregistration notice applies.
- Review RBI announcements concerning restrictions.
- Confirm the bank named on the actual deposit receipt.
- Preserve account and nominee information.
Do not use an image of a DICGC logo as the only verification. A fraudulent website can copy a logo.
Practical Ways to Manage Deposit Risk
Calculate the combined balance
Include savings and current balances, fixed and recurring deposits, and accrued interest held at the bank in the same right and capacity.
Allow room for interest
A fixed deposit with exactly ₹5 lakh principal may grow beyond the insurance ceiling once interest is added. Consider projected interest, not only the starting principal.
Verify the institution
A high return offered by an NBFC, cooperative society, application or company should not be assumed to have DICGC protection.
Keep KYC and nomination updated
Review your mobile number, email address, postal address, PAN or applicable KYC information, nominee and joint-account instructions.
Preserve records
Keep deposit receipts, statements, account numbers, nomination acknowledgement and official bank correspondence. Do not store passwords, PINs or OTPs in the same document.
DICGC Scam Warning Signs
Be cautious if someone:
- Demands an advance payment to release insured money
- Promises payment above the legal insurance ceiling
- Requests an OTP, PIN or online-banking password
- Uses a personal UPI account for a “claim fee”
- Claims to be a private DICGC recovery agent
- Asks for remote access to a phone or computer
- Sends a shortened or misspelled DICGC link
- Guarantees immediate claim settlement
- Claims every investment sold by a bank is insured
Frequently Asked Questions
Is the ₹5 lakh limit for each bank account?
No. Eligible accounts belonging to the same depositor at the same bank are combined when held in the same right and capacity.
Are deposits at different branches separately insured?
No. Deposits across branches of the same bank are aggregated.
Are deposits in two different banks separately insured?
Yes. The limit is applied separately to each insured bank.
Are fixed deposits and interest covered?
Eligible fixed deposits are covered. Principal and accrued interest are combined within the overall ₹5 lakh ceiling.
Does opening several fixed deposits increase the cover?
Not when those deposits are held by the same person in the same right and capacity at the same bank.
Are small finance bank deposits insured?
A licensed small finance bank appearing on DICGC’s insured-bank list is covered under the applicable rules. Verify the current list before depositing.
Are cooperative-bank deposits covered?
Eligible cooperative banks are covered. Do not assume that every cooperative society is an insured cooperative bank.
Does deposit insurance cover mutual funds bought through a bank?
No. A mutual fund is an investment product, not an insured bank deposit.
Will payment always arrive automatically within 90 days?
The statutory mechanism applies to qualifying banks under AID and depends on submission of records, willingness and KYC verification. It is not an unconditional payment promise for every banking dispute.
Conclusion
DICGC deposit insurance provides an important safety net, but its calculation is narrower than many depositors assume.
The core rule is ₹5 lakh per depositor per insured bank for eligible deposits held in the same right and capacity. Savings accounts, recurring deposits, fixed deposits and accrued interest at different branches of the same bank are normally combined.
Before placing a large deposit, verify the institution on DICGC’s official list, calculate the combined principal and projected interest, keep KYC and nomination details updated and preserve the deposit records.
This article provides general financial education and not personalised investment, banking or legal advice. Coverage and claim requirements should be verified from DICGC, RBI and the concerned bank.
Official Sources
- DICGC: Guide to Deposit Insurance
- DICGC: Frequently Asked Questions
- Department of Financial Services: Banking
- Reserve Bank of India Annual Report
