Deposit Insurance (DICGC)

Every Indian depositor who holds a savings account, current account, fixed deposit, or recurring deposit with a commercial bank, small finance bank, or cooperative bank is automatically covered under the DICGC umbrella. The cover of ₹5 lakh—raised from ₹1 lakh in February 2020—applies per depositor per bank across all branches combined, not per account. If a person holds accounts in two different banks, each relationship is independently insured up to ₹5 lakh.

DICGC was established under the Deposit Insurance and Credit Guarantee Corporation Act, 1961. The premium paid to DICGC is 12 paise per ₹100 of deposits per annum, borne entirely by the bank and not charged to the depositor. The scheme does not require any active registration by the depositor; coverage begins automatically when an account is opened.

The significance of DICGC became vividly clear during the Yes Bank crisis of 2020 and the PMC Bank crisis of 2019, when retail depositors faced temporary restrictions on withdrawals. Following the PMC episode, Parliament amended the DICGC Act in 2021 to mandate that insured depositors receive their money within 90 days of a bank being placed under a moratorium—a dramatic improvement over the earlier framework where recovery could take years.

It is worth understanding what DICGC does not cover. Inter-bank deposits, deposits of state and central governments, and deposits held abroad are excluded. Furthermore, the insurance covers principal plus accrued interest up to the ₹5 lakh combined cap; amounts exceeding this limit are treated as unsecured creditors of the bank in liquidation.

For a household with, say, ₹8 lakh parked in a single bank, only ₹5 lakh is guaranteed. The practical implication is that risk-conscious depositors consider spreading balances above the insured threshold across multiple banks. This is particularly relevant when depositing with smaller cooperative banks or new-age small finance banks, which may carry higher credit risk than large public sector banks.