Venky and Nandini were watching Taarak Mehta Ka Ooltah Chashmah. and in line with what was happening in the episode, they were drawn into a conversation on bank deposits. Here’s how it unfolded:
Nandini: The point raised in the episode is valid. If a bank goes bust, then the hard-earned money and savings of the common man are jeopardised. It’s not fair.
Venky: Yes, but there is decent protection for depositors’ funds if the bank shuts down for good.
Nandini: Really!! What is it?
Venky: It is called Deposit Insurance and Credit Guarantee Corporation cover, in short DICGC cover. A wholly-owned subsidiary of RBI, it is essentially an insurance company; banks pay regular premium to this entity in order to insure the deposits. Initially the sum insured was ₹1 lakh per depositor but Budget 2020 raised the limit to ₹5 lakh including both principal and interest.
Nandini: Does the bank charge this premium from us?
Venky: No, the insurance premium is borne entirely by the bank; currently the premium is 10 paise per ₹100 deposit.
Nandini: Great, but since there are many types of deposits in banks does this ₹5 lakh cover all deposits?
Venky: Yes, the total deposits of the depositor with the bank including savings account, FD, RD, current account etc. are covered up to ₹5 lakh. In case the total deposit is above ₹5 lakh the excess amount is not guaranteed and the repayment will be dependent on factors like the amount recovered after the liquidation of the bank assets, etc.
Nandini: So, what if I have more than one account in different branches of the bank?
Venky: The cover is for each customer per bank. Therefore, even in case of multiple accounts in the same bank, the cover will be ₹5 lakh only. Depositors will have this cover for each bank and can plan accordingly.
Nandini: How long does it take for DICGC to disburse the amount to depositors?
Venky: In case a bank shuts shop, a liquidator is appointed who makes a claim list and has to send it to DICGC which has to pay within two months of receiving this list.
Nandini: Are there any previous examples?
Venky: Yes, Karad Janata Sahakari Bank was shut down by RBI in December 2020 and the depositors’ claims were settled on April 7, 2021. Another Vasantdada Nagri Sahakari Bank also wound up and DICGC sanctioned the claim on May 6,2021