Deposit Insurance covers Savings, Fixed, Current, and Recurring deposits and is counted as a cumulative of all accounts a person has with a bank. For example, if person A has Rs 1 Lakh deposited across four accounts in the same bank, their insurance amount overall will be Rs 4 Lakh.
This calculation holds even for amounts above Rs 5 Lakh. Let’s say the overall deposit of person A in one bank is Rs 15 Lakh; their insured amount will still be Rs 5 Lakh. It’s worth noting that Rs 5 lakh here includes both principal and interest amounts combined.
A few types of deposits are not covered by Deposit Insurance. These include –
- Deposits made by central or state government
- Deposits made by foreign governments
- Deposits made by the State Land Development Banks with the State Co-operative Bank
- Inter-bank deposits
- Funds due on account of India and deposits received outside India
- Any funds that are exempted by the corporation with the previous approval of the RBI
- NBFC deposits that are not covered by the RBI. Eg – Bajaj Finance, Shriram, M&M, Tata Capital
Any bank depositor would want most, if not all, of their money insured when they make bank accounts. If you have over Rs 5 Lakh in your account, you should be looking at ways to maximise your coverage
How can you Maximise deposit insurance?
According to the DICGC, the deposits held in the same rights and same capacity are clubbed together for deposit insurance. Your Savings, Current, Fixed, and Recurring deposits are considered as deposits held in the same right and capacity here.
The easiest way to manoeuvre is to look outside of deposits that are held this way. Here are some ways –
- Consider opening a joint account with your spouse/family
- Opening a fixed account with your children/siblings/spouse
- Opening a Guardian account for minors, i.e. your children
- Opening a joint account in reverse order (reversing primary owners)
- Moving to other banks and having similar accounts there
Other ways also include –
- Opening an account as a partner of a firm
- Opening an account as the Director of a company
Let’s dive deeper
| Savings A/C | Current A/C | FD A/C | Total Deposits | Deposits Insured upto | |
| Mrs. Maya Kumar | 4,17,200 | 22,000 | 80,000 | 5,19,200 | 5,00,000 |
| Mrs. Maya Kumar (Partner of XYZ) | 4,75,000 | 50,000 | 5,25,000 | 5,00,000 | |
| Mrs. Maya Kumar (Guardian for Rohan Kumar) | 97,800 | 3,80,000 | 4,77,800 | 4,77,800 | |
| Mrs Maya Kumar (Director, ABC) | 4,30,000 | 2,45,000 | 6,75,000 | 5,00,000 | |
| Mr Prem Kumar jointly with Mrs. Maya Kumar | 87,500 | 4,50,000 | 70000 | 6,07,500 | 5,00,000 |
Source – DICGC India
Opening a Joint Account
When you open a joint account, both of you become joint depositors. This means that each party is insured up to Rs 5 Lakh. For example, if A and B have Rs 7 Lakh in their joint account, they are both liable individually for Rs 5 Lakh as insurance amount. Although, the remaining Rs 2 Lakh will not be insured.
If you already have a joint account, try opening a joint account with a different primary owner. Let’s say that A is already the primary owner in A and B’s joint account. A and B can then open another joint account where B is the primary owner to insure more of their deposits.
Fixed deposit accounts work similarly. Instead of a single fixed deposit account for your family, opt for a joint account with your spouse and your children separately.
Guardian Accounts
When you open a Guardian account for your children, the deposit is considered to be for your children. Instead of opting for a savings account as a fund for your children, open guardian accounts for each of them separately. This will allow them to be individually insured.
Moving to a Different Bank
Since deposits held in the same bank are clubbed together under deposit insurance, one can look to increase their insurance coverage by making deposits across multiple banks.
It’s Better to be Safe than Sorry
Not having your money in a bank is an increasingly impossible option for many. The best thing you can do then is to look into ways to maximise your insurance coverage. Be sure to research all options and regulations before you start!
