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Only Rs 1 Lakh Insured if Banks Close Down? Here's All You Need to Know About Deposit Insurance Cover Scheme Amid PMC Bank Crisis

Team Latestly

New Delhi, October 16: Post the crisis which has gripped the Punjab and Maharashtra Cooperative (PMC) Bank, customers of several state-run and cooperative lenders are under panic on whether their deposits are safe. Significant to note is that the Deposit Insurance and Credit Guarantee Corporation of India (DICGC) -- the body assigned by the Reserve Bank of India (RBI) -- insures a sum of only Rs 1 lakh per account. PMC Bank Crisis: RBI Raises Withdrawal Limit to Rs 40,000.

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The DICGC, a wholly-owned subsidiary of the RBI, was established in 1978 by the central bank with the aim of safeguarding the savings of customers. All depositors are by default insured under DICGC, irrespective of whether their deposits are of savings, fixed, current or recurring nature.

Which Types of Account Are Not Insured?

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The DICGC will insure the sum of all regular Indian bank account holders. Among those exempted from the insurance cover are deposits of foreign governments, deposits of central/state governments and inter-bank deposits.

Deposits made by other state cooperative banks into a particular lender, along with the deposits made by a state land development bank, are also not insured.

The DICGC is also not liable to pay any amount arising out of amount due on account of any deposit received outside India.

Insurance is Capped at Rs 1 Lakh?

The deposit insurance cover is capped at Rs 1 lakh per account. The upper limit ceiling has raised apprehension among several depositors who have deposited more than the said amount in the public and private lenders.

As seen in the PMC Bank case, several customers have deposited way above the permissible amount. One among them, Sanjay Gulati with deposit of Rs 90 lakh, died on October 14 after succumbing to a heart attack. The preliminary probe has, however, not linked his demise to the stress he was facing after the bank's crisis unfolded.

The State Bank of India (SBI), India's largest state-run lender, has clearly mentioned the ruling regarding the deposit insurance cover on its website. The bank has cited the rule which states that the DICGC would insure not more than Rs 1 lakh per account.

"The DICGC insures all deposits such as savings, fixed, current, recurring, etc. Each depositor in a bank is insured up to a maximum of Rs.1,00,000/- (Rupees One Lakh only ) for both principal and interest amount held by him in the same right and same capacity 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," the rule states.