February 8, 2012

Bank FDs-Is your Bank have Deposit Insurance and Credit Guarantee(DICGC)?

In India each person have at least few thousand rupees as investment in Bank FDs. Because this is treated as safe heaven of investment since history. But have you ever thought what will happen if your Bank become bankrupt? Who will pay you back and how much you get?

To protect depositor, RBI came up with insurance and credit guarantee facility. Which is called as DICGC-Deposit Insurance and Credit Guarantee Corporation. It protects the depositors in case when banks bankrupt. So, we will look into the features of this investor friendly facility.

1) Banks covered under this facility-Commercial Banks: All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks are insured by the DICGC.

Cooperative Banks: All State, Central and Primary cooperative banks, also called urban cooperative banks, functioning in States orUnion Territories are covered under the Deposit Insurance System. At present all co-operative banks other than those from the States of Meghalaya, and the Union Territories of Chandigarh, Lakshadweep and Dadra and Nagar Haveli are covered under the deposit insurance system of DICGC.

Primary cooperative societies are not insured by the DICGC

2) What does DICGC covers?

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.

3) Maximum amount Insured-Each depositor in a bank is insured upto a maximum of Rs.1,00,000 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/merger/reconstruction comes into force.

4) How to know whether my bank is insured by the DICGC or not?

The DICGC while registering the banks as insured banks furnishes them with printed leaflets for display giving information relating to the protection afforded by the Corporation to the depositors of the insured banks. In case of doubt, depositor should make specific enquiry from the branch official in this regard.

5) Who will pay the cost for this insurance?

Banks will pay this cost. Hence investors are no need to worry.

Now we will look how we can get maximum benefit of this facility.

1) Dont put all your money in same Bank. As the maximum cover is Rs.1,00,000 including the money you kept in the branches of same bank. Hence it is better to diversify it.

2) Maximum Insurance cover includes both Principal and Interest. Hence it is better to check out how much is your balance in each Bank.

3) Suppose your deposit crosses the maximum insurance cover then instead of holding it on single make it joint holding. Example-If you want to park Rs.2,00,000 in a single bank then better hold Rs.1,00,000 in your name and remaining Rs.1,00,000 in a joint account mode either with your wife or parents.

Single holding (As per RBI)-If an inpidual opens more than one deposit account in one or more branches of a bank, e.g. Shri S. K. Pandit opens one or more savings/current account and one or more fixed/recurring deposit accounts etc., all these are considered as accounts held in the same capacity and in the same right. Therefore, the balances in all these accounts are aggregated and maximum insurance cover is available upto rupees one lakh.

Separate holding (As per RBI)-If more than one deposit accounts (Savings, Current, Recurring or Fixed deposit) are jointly held by inpiduals in one or more branches of a Bank say three inpiduals A, B & C hold more than one joint deposit accounts in which their names appear in the same order then all these accounts are considered as held in the same capacity and in the same right. Accordingly, balances held in all these accounts will be aggregated for the purpose of determining the insured amount within the limit of Rs.1 lakh.

However, if inpiduals open more than one joint accounts in which their names are not in the same order for example, A, B and C; C, B and A; C, A and B; A, C and B; or group of persons are different say A, B and C and A, B and D etc. then, the deposits held in this joint accounts are considered as held in the different capacity and different right. Accordingly, insurance cover will be available separately upto rupees one lakh to every such joint account where the names appear in different order or names are different.

So by knowing about the features of this facility you can have sigh of relief about your deposits or money you have in your Bank accounts. Happy Saving!!

15 Comments

  1. Hi Basu, Regarding your tip on checking bank details in /www.dicgc.org.in is really good.

    Reply
  2. Sir i have opened one single savings account and got 3 fd from it in the names of me & mother, me & wife, me & brother 1lac each fd. Are these fd seperately insured or not pl rply.

    Reply
    • Aditya-If each such deposits first account holders are different, then all these FDs are eligible under DICGC.

      Reply
      • Sir actually I wanted to confirm the example given at the site of dicgc where it is mentioned that if indivuals open 2 or more deposit accounts in same bank with different combination of name as A,B,&C or B,C,&A or C,B,&A or A,C,&B or with different people as A,B,&D then also all accounts are seperately insured. Here they have not emphasised that primary holder name shud b different. Under this example can we have multiple fixed deposits with such combination in same bank.

        Reply
        • Aditya-I know as I have also written the same but they have not clearly mentioned who must be the first holder. Hence, for the safety measure, I suggested this.

          Reply
  3. I wnat to know if any scheduled comemrcial bank is offerng a daily deposit FD ?

    Reply
  4. Hi,

    I have a FD.Should I submit 15G and 15H forms ? And also Can I transfer tat amount to other account?

    Reply
  5. Hi,

    Is there any way to check if a particular bank is registered under this scheme or not ?

    Like a website or something ?

    I want to check if a co-operative bank providing more interest rates is covered or not like TJSB.

    Thanks

    Reply
  6. Very good details

    Reply
    • The above details regarding DICGC is very good and every depositors must know it.
      Thanks

      Reply
    • Rakesh Goswami-Thanks for your comments 🙂

      Reply

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