Have you ever wondered what happens to your money if a bank shuts down? Is your hard-earned savings safe? That’s where DICGC comes in. It’s a government-backed insurance that protects your bank deposits up to a certain limit. In this blog, let’s understand how DICGC works and how it keeps your money secure.
What exactly is DICGC?
DICGC stands for Deposit Insurance and Credit Guarantee Corporation. It is a wholly owned subsidiary of the Reserve Bank of India (RBI). DICGC was created in 1961, to protect depositors’ money and to maintain trust in the banking system.
The main role of DICGC is to protect depositors by insuring the money kept in banks. If a bank fails or shuts down, DICGC steps in and makes sure depositors get back their insured money – up to a fixed limit.
How Much of Your Money is Insured under DICGC?
Under DICGC, each depositor is insured up to ₹5 lakh in one bank. This means if a bank fails, you can get back up to ₹5 lakh of your total money in that bank. This ₹5 lakh limit was increased from ₹1 lakh in 2020 to give more safety to depositors.
Now, you may have a question that does it include both interest and payment? Yes, the ₹5 lakh limit includes both your deposit amount (principal) and the interest earned on it. For example, if you had ₹4.80 lakh in a fixed deposit and earned ₹20,000 as interest, the total ₹5 lakh is fully covered.
Let’s say – you have the following in one bank:
- Savings account: ₹1 lakh
- Fixed deposit: ₹3.5 lakh
- Interest earned: ₹50,000
- Total = ₹5 lakh – This entire amount is covered by DICGC.
But if your total is more than ₹5 lakh (say ₹7 lakh), then only ₹5 lakh is insured. The remaining ₹2 lakh is not guaranteed to be returned.
Which Banks Are Covered by DICGC?
DICGC covers almost all banks where you keep your money – whether they are government, private, or cooperative banks. Here’s a simple breakdown:
Public Sector Banks
All government or public sector banks are covered under DICGC. This includes popular banks like State Bank of India (SBI), Bank of Baroda, Punjab National Bank, and others. So, if you have money in a government bank, it is insured up to ₹5 lakh.
Private Banks
All major private banks like HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, etc. are also covered. So, even if your bank is private, your money is still protected under DICGC.
Cooperative Banks
Urban and rural cooperative banks, which are common in Tier 2 and Tier 3 cities, are also covered. This is important for people who keep money in district banks or co-op banks, as they too enjoy the ₹5 lakh insurance.
Small Finance & Foreign Banks
Banks like AU Small Finance Bank, Equitas, Ujjivan, and others are covered. Also, foreign banks operating in India like HSBC, Citibank, or Standard Chartered are covered under DICGC – for the deposits made in their Indian branches.
What Type of Deposits Are Covered?
DICGC protects not just your savings, but most types of deposit accounts. Here’s what is covered under the ₹5 lakh insurance:
- Savings Account: Your regular savings account, where most people keep their salary or monthly savings, is fully covered under DICGC – up to ₹5 lakh (including interest earned).
- Fixed Deposits (FD): FDs or Term Deposits are also protected. So if you have one or more fixed deposits in the same bank, the total (FD amount + interest) is insured up to ₹5 lakh.
- Recurring Deposits (RD): If you’re saving money monthly through an RD, this is also insured. Just like FDs, your RD amount and the interest earned are included in the ₹5 lakh limit.
- Current Account: Even though a current account is used mostly by businesses or shopkeepers, it is also covered. So, any money in your current account is protected up to ₹5 lakh.
What’s NOT Covered by DICGC?
While DICGC gives strong protection, it does not cover everything. Here are the key things not insured under this scheme:
- Deposits beyond ₹5 lakh: If your total deposits (principal + interest) in one bank are more than ₹5 lakh, then only ₹5 lakh is insured – the extra amount is not guaranteed to be returned. For example, if you have ₹7 lakh in a bank, DICGC will cover only ₹5 lakh. The rest depends on how the bank handles its recovery process.
- Deposits in NBFCs or chit funds: Money kept in NBFCs (Non-Banking Financial Companies), chit funds, finance companies, or cooperative credit societies is not covered by DICGC. Only registered banks under RBI are eligible. So always be careful where you’re depositing your money.
- Fraud or illegal accounts: If a bank account is found to be fraudulent, illegal, or opened using fake documents, DICGC will not provide any insurance. Always keep your documents updated and make sure your account is valid and verified.
How and When Will You Get Your Money If a Bank Shuts Down?
If a bank in India shuts down or is restricted by the RBI due to financial trouble, DICGC steps in to protect your money. Your deposits – up to ₹5 lakh per person per bank (including principal and interest) are insured. Here’s how the process works:
- Bank Shutdown: When the RBI cancels a bank’s license or stops its operations, DICGC begins the insurance process.
- Data Collection: The bank prepares a list of all depositors and their balances, and sends it to DICGC within 45 days.
- Verification: DICGC checks and verifies the data received from the bank.
- Payout: After verification, DICGC releases the insured amount directly to your registered bank account or through a method coordinated with the bank within 90 days.
Frequently Asked Questions on DICGC
Is DICGC free for depositors?
Yes, DICGC coverage is completely free for depositors. You don’t have to pay anything to get your money insured. The insurance premium is paid by the banks, not by customers. So your savings are protected at no extra cost to you.
What is the timeline for getting a refund from DICGC?
DICGC usually releases the insured amount within 90 days from the RBI’s direction to shut down or restrict the bank. This depends on the bank submitting complete and correct depositor data. If there are delays from the bank’s side, the process may take longer.
Do you need to file a claim to get your money back?
No, you don’t need to file any claim. The bank sends all your account details directly to DICGC. You will automatically receive the insured amount, unless your bank or DICGC contacts you for missing information or clarification.
Are post office deposits covered under DICGC?
No, post office deposits are not covered by DICGC. They are backed directly by the Government of India, not by banks. So while they are generally safe, they fall under a different protection system – not DICGC.
If I have ₹5 lakh in 3 different banks, will all be insured?
Yes, each bank is insured separately. If you have ₹5 lakh in three different banks, each amount is insured up to ₹5 lakh. So, a total of ₹15 lakh across three banks would be fully protected under DICGC.
What is the DICGC insurance limit for joint accounts?
Under DICGC rules, each person in a joint account can get up to ₹5 lakh insurance separately, but only if the combination of names and the order is different (like “A and B” vs “B and A”). If the names are in the same order, it is treated as one account and insured up to ₹5 lakh total.
