What is Deposit Insurance

Bank Deposit Insurance:




If a person deposits his/her money in a bank then maximum ₹5 lakhs money is insured according to the new budget proposal. So, if the person wants to withdraw his/her money from the bank, then he will guaranteed get minimum of (deposited money OR insured 5 lakhs amount). 

Previously this limit was of  ₹1 lakh. 

This scheme insures all types of bank deposits including savings, fixed and recurring with an insured bank. 

The bank deposits are insured by Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India. The agency does not directly charge any premium from bank depositors but banks pay a nominal premium for the cover.

This ₹5 lakhs insurance amount includes both principle and interest amount.

This insured amount is summed up for all the branches of a bank, but not for different banks. So, if we keep money in multiple banks then from each bank we will get maximum deposit insurance of 5 lakhs.


Ex:
Bank1(branch1) : deposit amount - 2 lakhs
Bank1(branch2) : deposit amount - 4 lakhs
Bank2(branch1) : deposit amount - 7 lakhs
Bank3(branch1) : deposit amount - 3 lakhs

if all the banks bank1, bank2 and bank3 are getting closed at the same time(although it is very unlikely to happen), then from bank1 we will get guaranteed 5 lakhs. same as from bank2 and from bank3 we will get 3 lakhs.

so, total we can loose 1 lakh(from bank1), 2 lakhs(from bank2) and 0 (from bank3).

If you have any doubt or need more information about the topic, please write down in the comment section, will get clarified soon.