Deposit insurance provides insurance protection to the depositor’s money by receiving a premium.

The government has set up Deposit Insurance and Credit Guarantee Corporation (DICGC) under RBI to protect depositors if a bank fails.

Every insured bank pays premium amounting to 0.001% of its deposits to DICGC every year.

When a bank is liquidated, depositors are entitled to receive an insurance of Rs.1 lakh per individual from the Deposit Insurance and Credit Guarantee Corporation of India(DICGC). The Rs.5 lakh insurance limit includes both principal and interest dues across your savings bank accounts, current accounts, fixed deposits and recurring deposits held with the bank.

Deposit Insurance and Credit Guarantee Corporation (DICGC):

DICGC came into existence in 1978 after the merger of Deposit Insurance Corporation (DIC) and Credit Guarantee Corporation of India Ltd. (CGCI) after passing of the Deposit Insurance and Credit Guarantee Corporation Act, 1961 by the Parliament. It serves as a deposit insurance and credit guarantee for banks in India. It is a fully owned subsidiary of and is governed by Reserve Bank of India

Banks, including regional rural banks, local area banks, foreign banks with branches in India, and cooperative banks, are mandated to take deposit insurance cover with the DICGC.

The corporation covers all commercial and co-operative banks, except in Meghalaya, Chandigarh, Lakshadweep and Dadra & Nagar Haveli. Besides, Only primary cooperative societies are not insured by the DICGC.

 The DICGC does not include the following types of deposits:

1. Deposits of foreign governments.
2. Deposits of central/state governments.
3. Inter-bank deposits.
4. Deposits of the state land development banks with the state co-operative bank.
5. Any amount due on account of any deposit received outside India.
6. Any amount specifically exempted by the DICGC with previous approval of RBI.