1. Deposit insurance is a safety net if an insured bank fails
Keeping money in a bank does not mean the bank itself can never fail. India therefore has a deposit-insurance system operated by the Deposit Insurance and Credit Guarantee Corporation, or DICGC.
For eligible deposits at an insured bank, DICGC insurance currently covers up to ₹5 lakh per depositor per bank, subject to the rules on the right and capacity in which the deposits are held.
The limit includes both principal and accrued interest. It is an insurance ceiling, not an extra ₹5 lakh payment on top of your deposit.
2. ₹5 lakh is per depositor per bank, not per account
Suppose you hold ₹3 lakh in a savings account and ₹3 lakh in an FD at the same insured bank in the same right and capacity.
You do not normally receive ₹5 lakh of cover for the savings account plus another ₹5 lakh for the FD. Relevant deposits at the same bank are aggregated before the insurance limit is applied.
So opening five savings accounts at five branches of the same bank does not create five separate ₹5 lakh insurance limits for deposits held in the same right and capacity.
3. Different banks can receive separate insurance limits
If you hold eligible deposits with two separate insured banks, the insurance limit is applied separately to each bank.
DICGC also distinguishes deposits held in a different right and capacity. For example, an individual account and certain accounts held in a legally different capacity may be treated separately under the insurance rules.
This is why the correct mental model is not merely “₹5 lakh per person.” The fuller idea is “per depositor, per bank, in the same right and capacity.”
Relevant deposits in the same right and capacity are combined for the limit.
The insurance limit is applied separately to each bank.
4. A product sold through a bank is not automatically an insured deposit
DICGC insurance is about eligible bank deposits. It should not be confused with protection for every investment you may buy through a bank or banking app.
Mutual funds, shares and similar investment products are not turned into insured deposits merely because your bank helped you buy them. Deposits with entities that are not insured banks should also not be assumed to have DICGC cover.
Before placing a large amount somewhere because it “looks like a bank product,” identify what the product legally is and who is accepting the money.
5. Quick check
You have ₹3.5 lakh in savings and ₹2 lakh in an FD at the same insured bank, all held individually in the same right and capacity. Ignoring additional accrued interest, what is the maximum DICGC insurance cover under the current limit?