Everyone wants to save their earnings and reap significant benefits in the future. To achieve this, many people choose FDs. However, many wonder what will happen to their deposits if the  bank they deposit faces financial difficulties or closes. Therefore, it's important to understand the rules of the DICGC (Deposit Insurance and Credit Guarantee Corporation).

According to DICGC regulations, depositors with a bank are eligible for deposit insurance coverage of up to a maximum of ₹5 lakh, which includes both the principal amount and the interest earned on the deposit.

What if you have an FD of Rs 10 lakh?

Suppose you have an FD of Rs 10 lakh with a bank and that bank fails. In such a case, the DICGC's insurance cover of Rs 5 lakh does not apply to the entire Rs 10 lakh. The insurance cover applies only to the principal amount and interest, up to a maximum of Rs 5 lakh. This insurance cover does not apply to the remaining amount.

Multiple FDs with the same bank don't increase coverage.
Two or three separate FDs with the same bank don't provide separate insurance cover of ₹5 lakh. For example, if you have ₹4 lakh in a savings account with one bank, ₹5 lakh in one FD, and ₹3 lakh in another FD, these deposits are generally considered together when determining insurance cover. Furthermore, keeping money in different branches of the same bank doesn't provide separate coverage.

Therefore, don't just look at the interest rate when making an FD. It's equally important to check whether the bank in question is covered under the DICGC insurance scheme and whether the ₹5 lakh limit applies to both the principal amount and the interest.

PC: Business today