DICGC FD Insurance: Why One Bank Isn't Enough — SkimNews
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- DICGC provides deposit insurance of up to ₹5 lakh per depositor, per bank, covering both the principal amount and interest earned on eligible deposits including fixed deposits.
- Multiple accounts at the same bank — savings, FDs, and deposits held across various branches — are clubbed into a single ₹5 lakh cover, meaning a depositor holding ₹12 lakh across three accounts at one bank would lose ₹7 lakh if that bank failed.
- Splitting one FD into several at the same bank does not create separate insurance covers; a ₹9 lakh FD split into three deposits of ₹2 lakh, ₹2 lakh, and ₹5 lakh still falls under the single ₹5 lakh cap.
- Distributing deposits across multiple banks is the simplest way to extend coverage — the ₹5 lakh limit applies independently to each bank, so ₹15 lakh split across three banks would have a larger insured portion than the same amount held at one institution.
- Joint accounts and deposits held under different legal capacities are exceptions under DICGC rules and may be insured separately, though depositors are warned against engineering arrangements without understanding the underlying ownership and paperwork.
- Depositors should verify whether their preferred bank appears on the DICGC-insured list, which covers commercial banks and several eligible cooperative banks but does not necessarily extend to all types of financial products.
Why it matters: For Indian depositors holding more than ₹5 lakh in FDs, concentrating deposits at a single bank — or splitting them into multiple FDs at the same institution — leaves the excess completely exposed in a bank failure. Only distributing funds across multiple DICGC-insured banks extends the safety cap dollar-for-dollar, making bank selection as critical as the deposit amount.
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