Deposit Insurance in India: What the ₹5 Lakh DICGC Cover Does and Does Not Do

Every bank deposit in India carries an insurance cover that the depositor never buys and never pays for directly. It is administered by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a wholly-owned subsidiary of the Reserve Bank of India, which has been operating deposit insurance since 1962. Most savers know the headline number — ₹5 lakh — and very little else. The details, especially the phrase "same right and same capacity", decide how much of a household's money is actually protected.

What the cover is, and where the ₹5 lakh came from

The limit was raised to ₹5 lakh per depositor from the earlier level of ₹1 lakh with effect from 04.02.2020. It applies to deposits in insured banks, and the scheme is not optional: it is compulsory, and no bank can withdraw from it. The Corporation may, however, cancel the registration of an insured bank if that bank fails to pay the premium for three consecutive periods.

The cover is broad in terms of product. DICGC insures all deposits such as savings, fixed, current and recurring accounts. All co-operative banks are covered at present; primary co-operative societies, which are not banks, are not insured by DICGC.

Principal plus interest, up to the ceiling

A common misreading is that the ₹5 lakh applies only to the principal. It does not. The cover extends to both principal and interest, subject to the overall ceiling. RBI's FAQ uses a simple illustration: a principal amount of 4,95,000 plus accrued interest of 4,000 means 4,99,000 is insured — the entire balance, because it is still under the limit. Flip the numbers and the logic bites the other way: on a claim of ₹6 lakh including accrued interest, the insured portion is ₹5 lakh, exactly as the illustrations published with RBI's DEA Fund FAQs show.

Deposits are also pooled, not counted account by account. Balances kept in different branches of a bank are aggregated for the purpose of insurance cover, and a maximum of up to rupees five lakhs is paid. Deposits held in the name of a proprietary concern where the depositor is the sole proprietor and deposits held in that person's individual capacity are likewise aggregated.

"Same right and same capacity": the phrase that does the work

The statutory formulation is that each depositor in a bank is insured up to a maximum of ₹5,00,000 for both principal and interest held in the same right and same capacity, assessed as on the date of liquidation or cancellation of the bank's licence. That is why multiple savings and fixed deposit accounts in a single name at one bank do not multiply the cover — they are all held in the same right and the same capacity, so they are added up and capped once.

It is also why the cover is assessed bank by bank rather than across a whole banking relationship, and why the names and order of holders on each account are facts worth checking on your statements rather than assuming. The reference date matters too: the same cut-off logic applies where a scheme of amalgamation, merger or reconstruction comes into force.

What is outside the cover

The exclusions are mostly institutional, which is why the practical answer for a retail depositor is that the product type rarely matters — the holding pattern and the identity of the bank do.

How and when the money actually moves

Until 2021, insured depositors of a stressed bank effectively had to wait for liquidation. That changed when a new Section 18A was inserted into the DICGC Act, 1961, brought into force with effect from 01.09.2021, enabling depositors to get easy and time-bound access to their deposits to the extent of the deposit insurance cover. Where a bank is placed under directions, DICGC is liable to make interim payments to depositors up to the deposit insurance cover of ₹5 lakh within 90 days of imposition of such directions.

RBI's press releases on individual bank failures show the mechanics. In one case the regulator stated that eligible depositors would be entitled to the deposit insurance claim amount up to a ceiling of ₹5,00,000 in the same capacity and in the same right, within 90 days, and that more than 99 per cent of the depositors of that bank would be covered for their entire account balance. In a separate liquidation, about 98.75% of the depositors were entitled to receive the full amount of their deposits from DICGC. Those percentages are the real measure of what a ₹5 lakh ceiling means for ordinary savers, even though the number looks small beside large balances.

In an amalgamation or merger, the route is different: DICGC pays the transferee bank the difference between the deposit (or the limit of insurance cover in force at the time, whichever is less) and what the depositor receives under the scheme, within two months from the date of receipt of the claim list from the transferee bank.

Who pays for the cover — and the shift to risk-based premium

The depositor pays nothing. Insured banks pay a premium to DICGC, and claims are met out of the Deposit Insurance Fund, which is built up from premium income, investment income and recoveries, net of tax. The system has run on a flat rate premium system, presently 12 paise per ₹100 of assessable deposits.

That is changing. In pursuance of an announcement in the Statement on Developmental and Regulatory Policies dated October 01, 2025, DICGC, with RBI's approval, advised insured banks of the implementation of a Risk Based Premium framework in a press release dated Feb 06, 2026. The stated aim is to incentivise sound risk management and reduce the premium paid by better rated banks. One consequence for the public: banks are required to maintain confidentiality of ratings and not to disclose ratings or the amount of premium paid to DICGC, so this will not become a published safety league table that depositors can read off.

From a depositor's point of view nothing changes in entitlement — the cover and the ₹5 lakh ceiling are the same whichever premium band a bank falls into. What changes is the incentive structure behind the scenes.

Deposits that simply go missing

A far more common risk than bank failure is forgetfulness. Credit balances in accounts not operated upon for 10 years or more, or amounts remaining unclaimed for 10 years or more, are transferred by banks to RBI's Depositor Education and Awareness (DEA) Fund — the entire amount, including accrued interest, on the last working day of the month following completion of that ten-year period. Crucially, the money still belongs to the customer, and there is no time limit for the customer or their legal heirs to claim it.

The scale is not trivial. Government information places the unclaimed amount in the DEA Fund at ₹ 60,518 crore (as on 31.1.2026), while ₹5,777 crore was returned across 22.95 lakh claims under the "Your Money, Your Right" campaign. RBI's UDGAM portal provides a central search facility for unclaimed bank deposits across participating banks, but it only helps you locate balances: the portal facilitates search and information on each bank's claim process, and unclaimed deposits can be claimed only from the respective bank.

How to read all this as a saver

Deposit insurance is a floor, not a guarantee of convenience. It is assessed per depositor, per bank, in the same right and capacity; it includes interest; it pays within defined timelines once a bank is placed under directions or wound up; and it is funded by banks, not by you. The questions worth asking of your own balance sheet are therefore structural — which bank, whose name, which capacity — rather than which product.

E-Square Tip: Because the cover is assessed per bank and per holding capacity, the most useful thing you can do is list your deposits bank-wise with the exact names and order of holders on each account, and see which balances get aggregated under a single ₹5 lakh ceiling. While you are at it, search RBI's UDGAM portal for old accounts in your name or a late relative's — unclaimed money carries no deadline, but nobody will come looking for you.