An image bearing a stamp of deposit insurance on an HDFC Bank passbook recently went viral on social media spreading panic among customers.
The stamp read: "The deposits of the bank are insured with DICGC and in case of liquidation of the bank, the DICGC is liable to pay each of the depositors through the liquidator. The amount of this deposit is up to Rs 1 lakh within 2 months from the date of claim list from the liquidator."
This, essentially, means bank account holders will get only up to Rs 1 lakh if the bank goes bust.
HDFC Bank later clarified the stamp was in accordance with RBI circular dated June 22, 2017, which mandated all banks -- commercial, small finance and payment -- to inform their customers about the limited 'deposit insurance cover'.
More than offering respite, the clarification confirmed what was dreaded by many: those who were unaware - only Rs 1 lakh of depositor's money is safe if a bank goes bankrupt. Naturally, this has triggered a lot of doubts in the minds of bank customers, especially in the wake of the PMC Bank scam in which the RBI has restricted cash withdrawals.
What's deposit insurance cover?
The central government has constituted Deposit Insurance and Credit Guarantee Corporation (DICGC) under the RBI to protect customers' interest if a bank fails or collapses. Each depositor in a bank is insured up to a maximum of Rs 1 lakh if a bank collapses or its licence is cancelled by the RBI.
What's RBI circular on deposit insurance cover?
The central bank's circular issued on June 22, 2017, states banks need to provide "adequate details of the transactions in the passbooks", including information about "deposit insurance cover". The details should include the "limit of coverage, subject to change from time to time, upfront in the passbooks", adds the circular.
Which banks are insured by DICGC?
All commercial banks, including branches of foreign banks functioning in India, local and rural banks are insured by the DICGC. As per the corporation, "at present all co-operative banks are insured by DICGC". All your deposits, including savings, fixed, current, recurring, etc, are covered for Rs 1 lakh insurance. Others deposits such as those of foreign or central/state governments, inter-bank, and state land development banks are also insured by the DICGC.
How to check if your bank is DICGC-insured?
To check if your bank is insured by the DICGC, depositors can contact their bank branch and ask for the details. As per the DICGC, the banks insured by it need to "display information relating to the protection afforded by the corporation to the depositors".
Can you increase insurance cover by opening multiple accounts?
The DICGC says all funds held in the same type of ownership -- name, identity details, etc, -- at the same bank are added together before deposit insurance is determined. If the funds are in different types of ownership or are deposited into separate banks, they would be separately insured.
Edited by Manoj Sharma