Look, your bank savings are insured sans paying a penny as premium

Did you know that all your bank deposits are insured and yet you don’t need to pay a single paisa?

CHENNAI: Did you know that all your bank deposits are insured and yet you don’t need to pay a single paisa? You heard it right. All savings of small depositors, made in public, private, regional or foreign banks, are insured to protect consumers’ interest in case a bank goes kaput.

Thanks to the Deposit Insurance and Credit Guarantee Corporation (DICGC), the world’s second oldest deposit insurer and RBI’s wholly-owned subsidiary set up in 1961, ensures that all fixed, current and recurring deposits made by individuals are protected in the case of a bank run. The best part is customers need not pay premium, or get involved in the claim settlement process either.

While deposit insurance comes as a boon, the extent of the insurance cover, however, is limited with each depositor assured of getting only up to Rs 1 lakh including principal and interest. It means, irrespective of whether your savings are above Rs 1 lakh, your recovery will not exceed that limit.

And insurance kicks in only against default by the bank, and not the account holder. Or say if you owe dues to the bank, your money will be deducted from the insurance before your final settlement.

Depositor-friendly step

The deposit insurance scheme is compulsory and no bank can withdraw from it. The DICGC charges a nominal premium from banks for protecting depositors’ interest.

You can be smart and make the most of the insurance cover. Here’s how

• If you have, say Rs 75,000 in your savings account and Rs 1 lakh in fixed deposits, then you are entitled to get only up to Rs 1 lakh
• If your principal is Rs 1 lakh, the interest it earns may not be covered in the insurance as the maximum cover is only Rs 1 lakh
• If you get your math correctly, you can split each of these savings to not exceed Rs 90,000 in order to maximize the safety net
• If you are holding one individual account and another joint account with your spouse or any other family member, your savings in both accounts are treated separately. For instance, you make a deposit of Rs 90,000 in your account and another Rs 90,000 in a joint account, you are entitled to get an insurance cover of up to Rs 2 lakh covering interest income. Remember to calculate this interest income from time to time
• Similarly, if you have an individual account and another account of your daughter or son, where you act as a guardian, then both are protected up to Rs 1 lakh each
• You can open two joint accounts, where you aren’t the primary account holder. In such an event, savings of each of these accounts are treated independently
• Simply put, in just one bank, by operating four different accounts, you are entitled for an insurance cover of up to Rs 4 lakh
• If you have more than Rs 4 lakh to sock up, replicate this with different banks to maximize your safety net
• But if you put Rs 1 lakh in five different branches of the same bank, they will all be bunched together and the insurance net will be the usual Rs 1 lakh
• In the case of a default, the official bank liquidator would make a claim on your behalf and DICGC is bound to pay the valid insurance claim within 2 months from receipt of claim
• Banks have the right to set off their dues from the deposits amount. The deposit insurance is available after netting such dues
• In case, the bank has been merged with another, DICGC will disburse the amount due to you through the latter