DICGC Deposit Insurance Explained: How the ₹5 Lakh Cover Works for Joint Accounts and FDs

Rekha has ₹1.2 lakh in savings and a ₹4.5 lakh FD at the same bank, both in her own name. That is ₹5.7 lakh in total. If the bank failed, DICGC deposit insurance would pay her ₹5 lakh, not ₹5.7 lakh. Her joint account with her husband at the same bank, though, is covered separately. The rules that produce both answers fit on one page, and almost nobody reads them until a bank is in trouble.

What DICGC deposit insurance covers

The Deposit Insurance and Credit Guarantee Corporation, an RBI subsidiary, insures bank deposits. Its Guide to Deposit Insurance sets the core rule: “Each depositor in a bank is insured upto a maximum of ₹ 5,00,000 (Rupees Five Lakhs) for both principal and interest amount held by him in the same right and same capacity.”

“Same right and same capacity”, explained

The ₹5 lakh limit applies per depositor, per bank, per capacity. The guide spells out how that works:

• Branches are added together. “The deposits kept in different branches of a bank are aggregated.” Opening an FD at a second branch of the same bank doesn’t create a second ₹5 lakh.
• Different banks are separate. “If you have deposits with more than one bank, deposit insurance coverage limit is applied separately to the deposits in each bank.”
• Different capacities are separate. Accounts you hold as a partner of a firm, guardian of a minor, director, trustee, or in a joint account are “considered as held in different capacity and different right”.
• Joint accounts depend on the order of names. Joint accounts with the names in the same order count as one capacity. If the order differs, or the group of holders differs, “insurance cover will be available separately up to Rupees Five Lakhs to every such joint account”.

One family, worked through

That is DICGC deposit insurance working as designed: only ₹70,000 is exposed, and all of it sits in Rekha’s sole-name accounts at Bank A. Moving that amount to Bank B, or into a different capacity, would bring it under cover.

Interest counts towards the cap. A ₹4.8 lakh FD earning 7% for a year grows to ₹5,13,600, which is ₹13,600 over the limit even though the amount deposited was below ₹5 lakh. If you keep balances close to ₹5 lakh, leave room for interest.

Loans are set off first. “Banks have the right to set off their dues from the amount of deposits as on cut off date.” If Rekha also owed Bank A ₹1 lakh on a loan, her ₹5.7 lakh would first be reduced to ₹4.7 lakh, and that ₹4.7 lakh would then be fully insured.

When and how a claim is paid

The 90-day route under Section 18A of the DICGC Act applies when RBI places a bank under “All-Inclusive Directions” (withdrawal restrictions). According to the DICGC guide:

As a depositor, you give the bank’s CEO or administrator a signed willingness form with attested copies of your officially valid documents. DICGC says there is no cut-off date for the form, as long as the bank is still under the directions when you submit it. The form is on DICGC’s willingness-form page.

Insurance is also paid when a bank is liquidated, its licence is cancelled, or it goes through an amalgamation or reconstruction scheme, as the guide’s definition sets out.

A five-minute check of your own cover

1. List each bank you use, and every account in it, with today’s balance plus interest due.
2. Group the accounts by capacity: sole name, each joint combination in its exact name order, guardian accounts, and so on.
3. Any group above ₹5 lakh at one bank is exposed by the amount above ₹5 lakh.
4. Check the nominee on every account. Insurance pays the depositor, and a nominee makes it easier for your family to claim. See nominee vs legal heir.

One more point on DICGC deposit insurance: DICGC’s FAQ says the scheme “is compulsory and no bank can withdraw from it”. You cannot opt in or out, and the per-depositor limit is the same ₹5 lakh at every insured bank. Spreading money across banks, or holding it in different capacities, is the only way to raise your total cover.

If you are rebalancing, an early FD break usually costs a penalty; our note on FD premature withdrawal rules shows how it is worked out. For how name order changes the way a joint account operates, see joint bank account modes.

That covers the method. The short answers people search for are below.

FAQ

Is the ₹5 lakh per account or per person?

Per person, per bank, per capacity. Two FDs in your sole name at one bank share one ₹5 lakh.

Are deposits in a small finance bank or a payments bank covered?

DICGC’s list covers commercial banks. If you are unsure about a specific bank, DICGC says to ask the branch, which is meant to display DICGC’s leaflet.

Does DICGC deposit insurance cover my mutual fund held through the bank?

No. DICGC’s “what’s not covered” list includes mutual funds, stocks, bonds and ETFs.

Do I need to apply for the insurance?

No. It is automatic, and the bank pays the premium. You only file a willingness form if a claim arises.

Takeaway: add up your balances bank by bank and capacity by capacity, including interest; anything above ₹5 lakh in one group is the part that isn’t insured.