DICGC raises deposit insurance cover to Rs 5 lakh

In a quick implementation of a budget provision, the Deposit Insurance and Credit Guarantee Corporation (DICGC), which protects depositors if a bank fails, Tuesday raised the limit of insurance cover per depositor from Rs 1 lakh to Rs 5 lakh with immediate effect.

The Reserve Bank of India, which governs DICGC, said in a note that the rule will be effective from Tuesday itself.

The relief to depositors was announced in the union budget presented by Finance Minister Nirmala Sitharaman on Saturday.

The corporation covers all individual bank deposits -- savings, fixed, current and recurring -- at all commercial and co-operative banks. The primary cooperative societies, however, are not insured by the DICGC.

With the latest change, the insurance limit for each depositor in a bank, will be capped at Rs 5 lakh, including both principal and interest amounts.

In case a bank goes into liquidation, depositors would get the insurance money as per their deposits for a maximum of up to Rs 5 lakh.

The demand for the change in limits to Rs 5 lakh became stronger after the collapse of Punjab Mumbai Co-operative Bank last year.