RBI explains DICGC functioning to ensure security of bank deposits

Recently, at a Noida-based branch of Punjab National Bank (PNB) in Uttar Pradesh, an employee of the bank transferred money from the accounts of several customers. Prior to this incident, there were reports of customer data leaks from the State Bank of India (SBI). As similar incidents emerged from several other banks, concern and fear grew among customers regarding how secure the funds kept in their banks are.

To resolve this confusion among customers, the Reserve Bank of India (RBI) has clarified that money kept in banks can be secured through the DICGC. The RBI's subsidiary, the 'Deposit Insurance and Credit Guarantee Corporation' (DICGC), works to provide financial security to account holders in such situations. According to a report by ABP Live, DICGC is a type of bank deposit insurance. If an insured bank is declared bankrupt or its operations are restricted, insurance payments of the deposited amount are provided to account holders under prescribed rules and procedures.

Under DICGC, deposits in savings accounts, current accounts, fixed deposits (FD), and recurring deposits (RD) receive insurance protection. Under this scheme, the total deposits of all accounts of a single person in one bank are combined to provide insurance up to a maximum of ₹5 lakh. This amount includes both the principal and the accrued interest, subject to applicable terms and conditions.

To explain how this security works, an example has been provided: if a person has ₹2 lakh in a savings account and ₹4 lakh in an FD in the same bank, their total deposit amounts to ₹6 lakh. In such a situation, that person will receive insurance protection only up to a maximum of ₹5 lakh.

Furthermore, separate insurance up to ₹5 lakh is available on deposits in different DICGC-insured banks. This means that if a person has deposited money in two different insured banks, separate insurance limits will apply to both banks. However, if there are accounts in different branches of the same bank, all deposits are combined to calculate the insurance.

The Deposit Insurance and Credit Guarantee Corporation (DICGC) is a wholly-owned subsidiary of the Reserve Bank of India (RBI). It was established in 1978. The primary objective of this institution has been to provide security to the savings of customers who deposit money in banks.