Bridging the Trust Deficit: Raising the ₹5 Lakh DICGC Cover for Depositor Security

The rising trust deficit in India’s banking system is a growing concern due to increasing bank failures. After Mumbai-based New India Co-operative Bank faced fraud charges in February 2025, the Centre has been discussing a hike in deposit insurance as a precautionary measure. This move aims to restore depositor confidence and enhance financial security. The initiative is to be taken by DICGC upon orders from the Central Government and the Ministry of Finance.. Read on to know all about the DICGC insurance limit increase.

What Is DICGC?

The DICGC full form stands for Deposit Insurance and Credit Guarantee Corporation. Established in 1978, the corporation is regulated by the Reserve Bank of India (RBI), under the jurisdiction of the Ministry of Finance. The DICGC insures the depositors by covering their investments when banks face failure. The current DICGC insurance amount is ₹5 lakh for every depositor and is applicable on both the principal sum and accrued interest.

How Does DICGC Protect Depositors in Case of Bank Failures?

If a bank goes into liquidation or becomes insolvent, DICGC becomes liable to pay depositors the investment amount for each of up to ₹5 lakh. This is done within a period of two months after receiving the receipt of the claim list from the liquidator. Now if there is a bank merger then the amount is paid by DICGC to the transferee bank. This is done according to the receipt of the claim list sent by the liquidator.   

How Has the DICGC Insurance Coverage Evolved to Restore Depositor Trust?

Over the past 50 years, the DICGC has steadily increased its insurance coverage, adapting to challenges and refining its approach to better protect depositors. Here is a brief overview of the DICGC insurance limit increase over the years since it was first incorporated:

There had been talks in the Centre about conducting a DICGC insurance limit increase from ₹5 lakh to ₹8-₹12 lakh. This is to take effect from the first quarter of this year 2025. The decision came after the recent controversy regarding Mumbai-based New India Cooperative Bank back in February 2025.

DICGC Claim Settlement for FY 2023-2024

DICGC settled claims for a total of ₹1,432 crore for the financial year 2023-2024. According to RBI reports, the amount concerns cooperative banks the most. The total number of insured banks with DICGC towards the end of FY '23-'24 was 140 commercial banks and 1,857 cooperative banks. 

The present limit of ₹5 lakh covers 98% of deposit accounts. However, when it comes to deposits, only about 43.1% of accessible deposits get insured. For commercial banks, it is 41.9 and 63.3% for cooperative banks.

What Does a DICGC Insure?

Here is an overview of investments and deposits where the DICGC insurance applies:

• Savings deposit
• Recurring Deposit
• Current Deposit
• Fixed Deposit

What Does DICGC Not Insure?

While the above-mentioned types of investments and deposits are insured by DICGC, there are also a few exceptions, such as: 

• Deposits made from foreign governments
• Deposits made from State and Central governments
• Any amount that is due of deposit received outside the borders of India
• Inter-bank made deposits
• Deposits made with State Co-operative and State Land Development banks
• Any amount which has been exempted by a corporation with an approval from RBI (Reserve Bank of India)

Final Word

The DICGC insurance limit increase can positively bridge a widening trust deficit amongst the general masses by providing better security for their savings. This step reassures the public that their hard-earned money is protected even in case of bank failures.

Meanwhile, Stable Money ensures that your fixed deposits are secured with DICGC coverage of up to ₹5 lakh per depositor. Additionally, our dedicated 24x7 customer support team is always available to assist you, making your investment journey smooth and hassle-free.

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