Bank Deposit Insurance in India: What Happens If a Bank Fails?
DICGC protects eligible bank deposits up to ₹5 lakh per depositor per insured bank, including principal and interest. Here is how the limit and claim process work.
Depositors can receive up to ₹5 lakh if an insured bank fails, with principal and accrued interest combined across accounts and branches held in the same capacity. Under bank deposit insurance India rules, DICGC covers savings, current, fixed and recurring deposits at eligible banks, while NBFC deposits and market-linked products remain outside protection.
Bank deposit insurance can protect your savings if an insured bank fails, but the cover is not unlimited. As of 6 October 2026, DICGC protection remains capped at ₹5 lakh per depositor, per insured bank, including principal and accrued interest.
Bank Deposit Insurance Limit and Latest Rules
India’s deposit insurance scheme is administered by the Deposit Insurance and Credit Guarantee Corporation, or DICGC. It is a wholly owned subsidiary of the Reserve Bank of India.
The current bank deposit insurance cover became effective on 4 February 2020, when the ceiling was increased to ₹5 lakh. The limit applies to deposits held in the same right and same capacity at one bank.
This means the cover is not ₹5 lakh for every account, FD or branch. DICGC combines eligible balances held by the same depositor in the same ownership capacity across all branches of a bank.
Recent regulatory changes have focused mainly on bank compliance. DICGC issued directions on premium payments in October 2025 and a risk-based premium framework in February 2026. RBI disclosure requirements relating to applicable DICGC premiums took effect from April 2026. These developments affect how banks fund and disclose insurance protection. They do not, by themselves, change the depositor’s ₹5 lakh limit.
Depositors do not need to buy this insurance. Eligible banks must obtain the cover and pay the premium.
DICGC Coverage for Savings Accounts, FDs and Other Deposits
DICGC generally covers eligible savings accounts, current accounts, fixed deposits and recurring deposits. Commercial banks, including foreign bank branches operating in India, regional rural banks and local area banks are covered. Eligible cooperative banks are also included, but primary cooperative societies are not insured.
Several products and balances fall outside DICGC protection. These include deposits raised by NBFCs, mutual funds, shares, bonds, exchange-traded funds and cryptocurrencies. A product does not become an insured deposit merely because a bank or its app sells it.
The ₹5 lakh ceiling includes both principal and accrued interest. For example, if an FD has principal of ₹4.95 lakh and accrued interest of ₹10,000, the eligible balance is ₹5.05 lakh. The maximum insured amount remains ₹5 lakh.
Deposits at separate banks receive separate limits. If you hold ₹5 lakh each with Bank A and Bank B, up to ₹5 lakh may be protected at each bank, subject to eligibility and ownership rules. However, ₹3 lakh at one branch and ₹3 lakh at another branch of the same bank are aggregated. Only ₹5 lakh of the ₹6 lakh total would be insured.
Joint accounts require closer attention. Accounts with the same holders listed in the same order are generally aggregated. Individual, joint, trust, guardian, partnership and company accounts may represent different rights or capacities. The actual treatment depends on bank records and applicable DICGC rules.
How Bank Deposit Insurance Works When a Bank Fails
The payment process depends on what happens to the bank.
Liquidation or licence cancellation
The liquidator prepares a depositor-wise claim list after identifying eligible balances as of the relevant cut-off date. Deposits in the same right and capacity are combined, and eligible bank dues may be set off against the depositor’s balance.
DICGC examines the claim and pays up to ₹5 lakh to the liquidator. According to the DICGC FAQ, payment is due within two months of receiving the claim list, subject to the prescribed process. The liquidator then distributes the money to depositors.
Merger, amalgamation or reconstruction
If the bank is merged or reconstructed, depositors may receive money under the approved scheme. DICGC can pay the admissible difference through the relevant bank or transferee bank, subject to the insurance ceiling.
RBI withdrawal restrictions
RBI can place a troubled bank under All-Inclusive Directions, which restrict withdrawals. Under Section 18A of the DICGC Act, the bank generally has 45 days to submit details of outstanding deposits. The statutory process aims to complete payment within 90 days from the date the directions were imposed, subject to accurate data, legal conditions and cooperation from the bank.
Depositors may have to submit a willingness form and officially valid identity documents. A withdrawal restriction does not always mean immediate payment. Customers should follow notices from RBI, DICGC and the bank rather than social-media messages.
Bank Deposit Safety Checklist for Depositors
Deposit insurance reduces potential losses, but it does not eliminate access delays, business disruption or losses above the ceiling. Use this checklist before placing a substantial sum with one institution:
- Confirm that the institution appears under the DICGC framework.
- Add all savings, current, FD and recurring deposit balances held at the same bank.
- Include expected accrued interest when calculating exposure.
- Check the bank’s legal entity, not only its brand, app or branch name.
- Spread deposits across separate insured banks where appropriate.
- Keep account numbers, KYC records, nominations and joint-holder details updated.
- Maintain emergency liquidity in another accessible account.
- Seek professional advice for trusts, firms, companies, joint accounts or deposits linked to bank loans.
What Bank Deposit Insurance Means for You
Do not assume that every account carries an independent ₹5 lakh guarantee. Track your total eligible balance, including interest, at each banking entity. If the amount exceeds ₹5 lakh, consider diversifying across suitable insured banks while reviewing service quality, interest rates and financial strength.
Bank deposit insurance is an important safety net, not a guarantee for every rupee or every financial product. Check the latest DICGC depositor guidance and RBI information before making decisions involving large or complex balances.
Frequently Asked Questions
What is the bank deposit insurance India limit if my bank fails?
The DICGC insures up to ₹5 lakh per depositor per insured bank if a bank fails. This cap includes both principal and accrued interest and applies to deposits held in the same right and capacity across all accounts and branches of that bank.
Are fixed deposits and savings accounts covered by DICGC insurance?
Yes, eligible savings accounts, current accounts, fixed deposits and recurring deposits are generally covered by DICGC insurance. The combined protection is capped at ₹5 lakh per depositor per insured bank, including accrued interest, rather than ₹5 lakh for each individual account.
If I have accounts in two branches of the same bank, will I get ₹5 lakh insurance on each?
No, deposits held across different branches of the same bank are added together for DICGC insurance. If you have ₹3 lakh in one branch and ₹3 lakh in another, only up to ₹5 lakh of the combined ₹6 lakh balance is insured, subject to eligibility rules.
Are NBFC fixed deposits, mutual funds and bonds covered by deposit insurance?
No, deposits raised by NBFCs and investments such as mutual funds, shares, bonds, exchange-traded funds and cryptocurrencies are not covered by DICGC. A product does not become insured simply because it is sold through a bank or a banking app.
Do I need to apply for DICGC insurance or pay for it myself?
No, depositors do not need to buy DICGC insurance or pay its premium themselves. Eligible banks are required to obtain the cover and pay the premium, while DICGC protection applies automatically to eligible deposits within the ₹5 lakh limit.
Sources & references
Bhavik Vaid
Bhavik Vaid writes on Indian markets, taxation, banking and personal finance for CADialogue. He covers RBI policy, GST and income-tax changes, mutual funds and market moves, translating them into practical guidance for retail investors, salaried professionals and business owners in India.
