While some banks have gone kaput in recent years, these cases are regarded as aberrations in a high security system. In addition to the regulatory framework, another factor that instills a sense of security for savers is the Deposit Insurance Scheme.

Under this scheme, the fixed deposit interest rates in all banks - including foreign banks in India, cooperative banks and regional rural banks - are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) against default by the banks due to bankruptcy, cancellation of banking license or merger. Premium costs will be borne by the bank and not the account holder.

With this system, each applicant is assured up to 1 lakh, including the amount of principal and interest, if the bank is unable to fulfill its commitment.

But if you have any contribution to the bank, the amount of coverage will be deducted before the money arrives.

The types of deposits are insured by the DICGC savings, time deposits, current and recurring. According to the banking regulator, deposits held at different branches of the bank will be grouped for purposes of insurance coverage. However, deposits in different banks are insured separately.

Deposits in joint accounts in various branches of the bank is also considered as a single detection, if the holders of the names appear in the same order in all these.

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It is interesting to note that if the order is changed, then it is believed to be held in a different capacity and different right. Therefore, the protective cover is applied separately.

As you do not have to pay the premium, you do not need to be involved in the process of compensation for injuries either. If your bank was liquidated, the liquidator appointed duty to send the list DICGC, as in an evaluation that will distribute the money to the liquidator, which in turn pass it on to account holders / depositors.

If your bank has merged with another, DICGC will pay the amount due to you in the latter.

Source: [ET]