New Delhi, February 1: Union Finance Minister Nirmala Sitharaman in her 2020-21 Budget speech made a big announcement and said that deposit insurance cover will be hiked to Rs 5 lakh from Rs 1 lakh. The Finance Minister reiterated that all depositors’ money in scheduled commercial banks is absolutely safe. Sitharaman added that a mechanism is in place to monitor the health of all the Commercial Banks. This means, if the lender goes bankrupt, an amount of up to Rs 5 lakh per account holder would be insured. Catch Live Updates of Budget 2020 Here.  

At present, the bank deposits are insured but the limit is perceived to be too low. Under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act, every depositor in a bank is insured up to a maximum of Rs 1 lakh including the principal and interest amount. The limit of Rs 1 lakh was set in May 1993. If a customer has deposits with more than one bank, the deposit insurance limit will apply separately to the deposits in each bank.

What is the maximum deposit amount insured by the DICGC?

Each depositor in a bank is insured upto a maximum of Rs.1,00,000 (Rupees One Lakh) for both principal and interest amount held by him in the same capacity and same right as on the date of liquidation/cancellation of bank's licence or the date on which the scheme of amalgamation or merger or reconstruction comes into force.

What does the DICGC insure?

In the event of a bank failure, DICGC protects bank deposits that are payable in India. The DICGC insures all deposits such as savings, fixed, current, recurring, etc. except the following types of deposits.

(i)  Deposits of foreign Governments;

(ii) Deposits of Central/State Governments;

(iii)Inter-bank deposits;

(iv) Deposits of the State Land Development Banks with the State co-operative bank;

(v) Any amount due on account of any deposit received outside India

(vi) Any amount, which has been specifically exempted by the corporation with the previous approval of Reserve Bank of India.

All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks are insured by the DICGC. It must be noted that Primary cooperative societies are not insured by the DICGC.

(The above story first appeared on LatestLY on Feb 01, 2020 12:56 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).