Winning Bizness Desk
Mumbai. The Indian government is considering a proposal to increase the deposit insurance limit from the current Rs 5 lakh to Rs 10 lakh. A senior finance ministry official confirmed that discussions are underway and a formal decision is likely within the next six months. However, the exact insurance limit is still being deliberated, and a final call will be made after evaluating multiple factors.
Key Parameters Under Review
According to officials, the government is examining several aspects before revising the insurance cap. These include the number of depositors who would benefit, the total insured amount, and the financial guarantee the government would need to provide. The final proposal will be sent to the Union Cabinet for approval, after which the finance ministry will make a formal announcement.
Insurance Under DICGC Act
Currently, in the event of a bank failure or closure, the Deposit Insurance and Credit Guarantee Corporation (DICGC) provides coverage of up to Rs 5 lakh per depositor. This insurance is offered under the DICGC Act. The amount is credited to the depositor’s account within 90 days from the date the bank is declared under moratorium or closed.
Last Revision Took Place in 2020
The deposit insurance scheme began in India in 1962 with a limit of Rs 1,500 per depositor. Over the decades, this cap was raised several times—to Rs 20,000 in 1976, Rs 30,000 in 1980, and Rs 1 lakh in 1993. The most recent revision came in February 2020 after the Punjab and Maharashtra Co-operative Bank crisis, when the limit was increased to Rs 5 lakh.
Triggered by Recent Bank Action
The renewed discussion about raising the deposit insurance limit follows the Reserve Bank of India's stringent action against New India Co-operative Bank in February 2025. The incident reignited public and policy-level interest in enhancing depositor protection amid concerns over bank health and systemic risks.
Claim Process and Bank Coverage
If a bank collapses or is placed under moratorium, it must submit depositor details to the DICGC within 45 days. The DICGC then releases the insurance amount to the bank, which is further credited to customer accounts within the next 45 days—completing the 90-day timeline. All commercial banks, regional rural banks, local area banks, and even branches of foreign banks operating in India are covered under the DICGC framework. Customers can verify whether their bank falls under DICGC through printed information sheets provided at the time of account registration or by consulting bank officials.
Key Points:
- Government mulling increase in deposit insurance from Rs 5 lakh to Rs 10 lakh.
- Final decision yet to be made; announcement expected within six months.
- Deposit insurance offered under DICGC Act in case of bank failure.
- Current Rs 5 lakh limit was set in 2020 after PMC Bank crisis.
- RBI action against New India Co-operative Bank reignited demand for higher cover.
- Compensation to depositors is released within 90 days of bank default.
- All commercial banks, including foreign and regional banks, are covered under DICGC.
