What is deposit insurance?

It is the insurance of your bank deposits. You can not buy it from the market but it is purchased by the bank for your deposits.

How much is covered?

Your deposits including all savings, current, FDs, RDs up to Rs. 1 lac is covered in this policy. That means if your bank runs out of money or is shutting down, then you will be paid up to Rs. 1 lac of your deposit.

Deposit Covered Example 
< 1 lac Actual deposit amount Example: Rs. 68k is deposited (including interest income), then Rs. 68k will be paid to you
= 1 lac Rs. 1 lac is covered Your entire money is covered in this case
‘>1 lac Rs. 1 lac is covered Example: Rs. 1.5 lacs is deposited, then Rs. 1 lac is covered and rest is forfeited

Note: that your interest is also covered under this limit only. So if you have a bank deposit of Rs. 90k and it’s interest till date is Rs. 20k then you have covered only for Rs. 1 lac and you lose out Rs. 10k

What if I have multiple accounts in the same bank will I have separate coverage?

No, all accounts balances are cumulated; for example, if you have two accounts in the same bank with Rs. 75k and Rs 50k, FD, and savings respectively then you will be covered for Rs. 1 lac only. However, if you have two accounts in two banks then you are covered separately.

What do we suggest:

  • Customers should keep the lowest amount in co-operative banks (don’t fall prey to the higher interest rates)
  • Customers should also diversify their portfolio in money markets. If that is not possible then at-least diversify the bank accounts by opening multiple accounts in different banks
  • RBI should increase mandatory deposit insurance in India
  • The increase (by RBI) should be done in proportion to the inflation from 1993, even better is to increase it dynamically as per inflation
  • There should be a different policy for different bank instruments, liquid funds like savings could have lower coverage but FDs and RDs should have higher coverage
  • RBI should allow people to take top-up on their deposits, for instance, if Mr. Mukesh wants to increase the coverage to Rs. 10 lacs or 1 crore then he should be allowed to buy a policy from the open market
  • There should be a separate provision for senior citizens, like double coverage and priority settlement

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