DICGC deposit insurance covers up to Rs 5 lakh for an eligible depositor at an insured bank in the same ownership capacity. The ceiling includes principal and accrued interest together. Opening several fixed deposits, keeping a separate savings account or using another branch of that bank does not create a fresh Rs 5 lakh allowance for each account.
| Question | How the cover works |
|---|---|
| Savings account plus FD at one bank? | Combined when held in the same right and capacity |
| Deposits at two branches? | Combined if both branches belong to the same bank |
| Principal plus interest? | Both count within the Rs 5 lakh ceiling |
| Deposits at different banks? | The limit applies separately to each bank |
| Who pays the insurance premium? | The insured bank |
Is the Rs 5 lakh cover per account or per bank?
The DICGC guide to deposit insurance makes ownership capacity central to the calculation. For one individual holding money in their own name, savings, current, fixed and recurring deposit balances at the same bank are aggregated. The bank's different branches do not count as different banks.
Consider a hypothetical depositor with Rs 2,40,000 in savings, Rs 2,30,000 of FD principal and Rs 20,000 in accrued interest, all in the same capacity at one bank. The combined amount is Rs 4,90,000, within the ceiling. Adding another Rs 40,000 recurring deposit takes the total to Rs 5,30,000. The insured amount is then capped at Rs 5,00,000; Rs 30,000 exceeds that insurance limit.
For a simple case without loan set-off, the calculation is: insured amount = the lower of Rs 5,00,000 and the total eligible balances plus accrued interest in that ownership capacity at that bank. This is an illustration of the ceiling, not a claim decision or a promise that money above it will necessarily be lost.
Does FD interest get separate insurance?
No separate allowance is created for interest. The Finance Ministry's explanation of the scheme explicitly includes accrued interest in bank deposits and confirms that all relevant accounts are considered together. It records that the Rs 5 lakh ceiling took effect on 4 February 2020.
For example, Rs 4,80,000 of principal plus Rs 35,000 of accrued interest produces a total of Rs 5,15,000. Applying the ceiling leaves Rs 15,000 outside the insurance amount. Our FD quarterly compounding guide explains how interest can accumulate; the insurance calculation then considers that accumulated amount alongside other eligible balances.
What happens to joint accounts and sole proprietorships?
DICGC's official FAQs distinguish deposits held in the same capacity from those held in a different capacity. An individual's personal accounts and deposits of their sole proprietorship are combined for the ceiling. A new business name alone does not establish an independent allowance for the sole proprietor.
Joint accounts need closer attention to the recorded holders. DICGC says accounts held by the same people in the same order are aggregated. It treats different groups of holders, or the same holders in a different order, as different rights and capacities for this purpose. The rule is about the account's legal holding pattern, not simply the number of account numbers.
Outstanding dues can also affect the calculation. The DICGC information booklet explains that loans and interest in the same capacity are set off against deposits before the claim is settled. A gross account balance therefore need not equal the eligible net claim. For the separate arithmetic of borrowing, see our home loan EMI and prepayment explainer.
When does deposit insurance become payable?
Insurance is not an ordinary withdrawal facility. DICGC describes different processes for liquidation, reconstruction or amalgamation, and banks placed under RBI directions restricting access to deposits. In liquidation, the liquidator submits depositor claims and distributes the payment received from DICGC.
The Finance Ministry explains the separate interim payment framework for insured banks under restrictive directions. DICGC's current guide describes a 90 day process, dependent on the bank submitting the required depositor list within 45 days. Depositors provide the bank with a signed willingness form and identity documents. Missing bank data can prevent settlement under that process, so the headline period should not be read as an unconditional promise.
Finally, the scheme concerns bank deposits. DICGC distinguishes insured cooperative banks from primary cooperative societies, which it says are not insured. An investment's label or an app balance is not enough to establish deposit coverage. Our mutual fund NAV explainer covers a different kind of holding, where value is calculated through fund assets and units.
