What is the maximum insurance provided for bank deposits?

The correct answer is 5 Lakh.

Key Points

• The maximum insurance coverage for bank deposits is Rs. 5 lakh per depositor.
• This insurance coverage is provided by the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India (RBI).
• The coverage includes deposits in all commercial banks, including branches of foreign banks functioning in India, local area banks, regional rural banks, and cooperative banks.
• The insurance covers principal and interest amounts combined, up to a maximum of Rs. 5 lakh.
• In the event of bank failure, the DICGC ensures that depositors get back their deposits up to the insured limit.

Additional Information

• Deposit Insurance and Credit Guarantee Corporation (DICGC): It was established in 1978 and is a wholly owned subsidiary of the Reserve Bank of India (RBI).
• Exclusions: Deposits of foreign governments, central and state governments, inter-bank deposits, and deposits of the state land development banks with the state co-operative banks are not covered under this insurance.
• Premium: Banks pay the insurance premium to DICGC, not the depositors. The premium is paid semi-annually.
• Claim Process: In case of a bank failure, the DICGC reimburses the depositors through the liquidator of the failed bank within two months of receiving the claim list from the liquidator.
• Historical Context: Earlier, the insurance coverage was Rs. 1 lakh, but it was increased to Rs. 5 lakh in the Union Budget 2020-21 to provide greater security to depositors.