The finance minister, Nirmala Sitharaman, has announced that in case a bank fails or withdrawals from the bank are stopped due to financial pressure on the bank, the depositors will be able to get immediate access to their deposits upto the deposit insurance amount of Rs 5 lakh, i.e., the amount to which deposits are insured under the 'The Deposit Insurance and Credit Guarantee Corporation Act, 1961' (DICGC Act). This will greatly help depositors in meeting immediate financial needs.

The FM said in her budget speech that she will bring in an amendment to allow this in the current budget session.

Owing to many banks facing stress and putting hardship on their depositors (for instance, YES Bank and PMC Bank), last year the insurance cover on deposits held in a bank was raised from Rs 1 lakh to Rs 5 lakh. However, this money was not immediately available to the depositors as they had to wait for the final resolution which could take anywhere from months to years, as it has been in the case of PMC Bank. In case of YES Bank, depositors had limited access to their deposits and had to wait for than a month after a new management team was put in place the Reserve Bank of India (RBI).

As per DICGC rules, each depositor in a bank is insured up to Rs 5 lakh for both the principal and interest amount on depsoits held by him in that particular bank. This includes all deposits held by a person in current account, savings account, fixed deposits and so on. If the total of all the deposits held by an individual in a singe bank exceed Rs 5 lakh, then he/she will be able to get Rs 5 lakh inclusive of principal and interest amount if the bank goes bankrupt.

What kind of deposits are covered
DICGC covers all deposits such as savings, fixed, current, recurring and so on except for the following deposits:

• Deposits of foreign governments;
• Deposits of Central/State Governments;
• Inter-bank deposits;
• Deposits of the State Land Development Banks with the State co-operative bank;
• Any amount due on account of and deposit received outside India
• Any amount, which has been bee ..
  
  
  What if you have accounts at different branches of the same bank?
  Currently, the insurance cover offered by the DICGC covers all different accounts of one depositor held with different branches of the same bank for maximum of Rs 5 lakh. Therefore, if you have more than one account with the same bank (even if in different branches), then, too, you will be insured for Rs 5 lakh only.
  
  

  However, deposit insurance coverage limit is applied separately to the deposits in different banks. For instance, let us say you have an account with Bank A and Bank B. Then, both the accounts will be separately insured up to Rs 5 lakh.
  
  

  
  What about joint accounts?
  As per the RBI, both single and joint accounts will be separately covered under the DICGC scheme.
  
  Sample this: You have a savings account which is operated solely by you and another one jointly operated with your spouse. In case you bank fails, then in such a case, both the accounts will be separately insured under the deposit insurance scheme.
  
  

   

• The Economic Times
• 01/02/2021