Does deposit insurance protect my money? Know-how your fund in a bank is protected
RBI has guaranteed you a maximum up to rupees one lakh is safe and covered under deposit insurance, in case a bank or financial institution fails to pay.
Incidents like the recent PMC bank crisis, banks under the PCA act and the periodic merger of PSU banks, create a panicky impact across depositors. But when this type of situation arises, Central bank emerges with a careful direction only on the part of withdrawals or any other way of restrictions on the depositors to prevent the repulsive situation.
After the PMC bank crisis reached to a disgraceful state of affairs, RBI turned down the free transactions and imposed the restriction on it till a valid decision reached in a sensible way.
Lack of awareness of the banking regulations, Continual cut in deposit rates, a set of banks with poor financial stability covered by gross NPAs or bad loans push us into an unpleasant emotion. That not only makes the situation worse but also more unease.
Hence, no graceful answers can satisfy a bank depositor further to have blind trust in banks.
How to keep my money protected then? Does DICGC cover all my deposits in a bank?
To make a safe to the public, RBI has a constructive provision Act known as the DICGC Act. (The Deposit Insurance and Credit Guarantee Corporation Act, 1961). The deputy governor of RBI is the chairman of the corporation. The whole purpose of the act clarifies that banks are covered by a deposit insurance scheme.
This act is not introduced newly. Earlier the act was intruded in the year 1968 with a coverage amount of Rs 5000. In the last revision, the coverage amount increased to rupees one lakh in the year 1993
Public deposits are safe in a bank subject to a specific amount.
Currently, the insurance coverage to each depositor in a bank up to a maximum of Rs 1, 00,000 /- (One Lakh Only) on principal with accrued interest if any.
Suppose, you hold your deposits in different branches of a bank, the insurance will be covered and paid on the cumulative amount maximum up to Rs 1,00,000 /- only, that also includes interest amount along with the principal amount.
To understand more clearly if your principal amount is rupees one lakh and accumulated interest is rupees three thousand, here the interest amount will not be insured.
But deposits in different banks, then that would be independently insured since the different types of ownership.
Here the bank’s means, all commercial banks, local area banks, regional rural banks (RRBs), Co-operative banks, and foreign banks that have their business operations in India are insured by DICGC.
The Deposit account means Savings and Current accounts, Recurring Deposits, and Fixed deposits that are payable in India only.
If you hold more than one account with the same power and same right then the accounts will be accumulated for the reason of covering insurance amount maximum up to rupees one lakh only.
(Example, if you have 3 deposit accounts jointly with others. You are the primary holder in each account and name of all in the same order).
Other hands, if the names are not in the same order or account group is made of different persons will be measured as different power with the different right. Thus insurance coverage will be independently considered to each such account up to a maximum of rupees one lakh.
Is the coverage enough to safeguard my whole hard-earned money?
In the United States, the Insurance coverage on deposits $ 2, 50,000 per depositor in the failure of a bank or a financial institution as long as the institution is a member of the Federal deposit insurance corporation (FDIC).
What a common man would think?
Probably we are not aware of the developments beyond boundaries or not competent enough to faith in our banking system.
If a deposit could be doubled in 8 to 10 years, then why cannot the insured amount at least be revised to a double amount.
That will at least keep trust in small investors.
In the expert views, if RBI considers the rise in insured value then the premium amount to banks would be high. Probably we do not know that who pays the premium amount for the insurance coverage. Since we have never come across.
This is being paid by banks. Unlike other charges, banks do not charge it from customers. But if the premium amount goes high for more coverage on deposits, then banks may remain stick to high landing rates or low deposit rates. After all the customers have to be suffered only.
But, the present frame of protection is totally a defeated state of providing a financial security.
Since, People trust banks the safest place keeping their hard-earned money. It needs to be increased.
Would it be safe if you keep money separately with different banks?
Logically and honestly the answer would be NO. Maintaining many accounts with the bank to the bank would lead you more paper and accounting works. So often we avoid that. Multiple bank accounts may complicate you to keep a healthy track of your finance.
Moreover, all banks have no similar pattern of providing the rate of interest. You may lose the higher side.
There are many other lacunas to have faced such as tracking of commissions and charges, Minimum balance, TDS workout, etc.
You may opt for another mode of investments to your idle money rather than keeping deposits in multiple bank accounts.
So, hope for a significant raise to the protection covered amount to keep a lively trust in banks by the depositors.
Are my bank deposits safe?
Does deposit insurance protect my money? Know-how your fund in a bank is protected RBI has guaranteed you a maximum up to rupees one lakh is safe and cover