What Happens To Your Money If A Bank Goes Bankrupt In India (2024)

Well, in case a bank collapses, the Deposit Insurance and Credit Guarantee Corporation (DICGC), under the guidelines of the Reserve Bank, provides insurance cover on the deposits of customers under this rule.

Banking Crisis In America: The ongoing banking crisis in America has once again grabbed the headlines worldwide as it affects the common people who put their life’s savings in a bank as they feel it is the safest place to keep their money. However, what will happen to the customers of a bank if it goes bankrupt? Well, in case a bank collapses, the Deposit Insurance and Credit Guarantee Corporation (DICGC), under the guidelines of the Reserve Bank, provides insurance cover on the deposits of customers under this rule.

What Does The Reserve Bank Guidelines Say?

Before February 4, 2020. Deposit Insurance on bank deposits in India used to be just one lakh rupees. That meant even if a customer had a deposit of Rs 10 lakh, he or she can only claim Rs 1 lakh as a guaranteed sum in case the bank collapsed.

The Modi government changed this rule and increased the deposit insurance cover from Rs 1 lakh to Rs 5 lakh. That is, the amount of up to Rs 5 lakh is insured for the customers having accounts in the sinking bank. On the date on which the license of the bank is cancelled or the closure of the bank is announced, then on that date, the customer can get a maximum of five lakhs out of the deposit and interest in his account.

The Insured Amount Will Be Disbursed In 90 Days

According to the rules of the Deposit insurance system, the account holders will get the insured amount within 90 days if a bank collapses. This includes all savings accounts, current accounts and recurring accounts. All commercial banks including branches of foreign banks functioning in India, local area banks and regional rural banks are insured by the DICGC.

Cooperative Banks: All State, Central and Primary cooperative banks, also called urban cooperative banks, functioning in States / Union Territories which have amended the local Cooperative Societies Act empowering the Reserve Bank of India (RBI) to order the Registrar of Cooperative Societies of the State / Union Territory to wind up a cooperative bank or to supersede its committee of management and requiring the Registrar not to take any action regarding winding up, amalgamation or reconstruction of a co-operative bank without prior sanction in writing from the RBI are covered under the Deposit Insurance Scheme. At present all co-operative banks are covered by the DICGC.

NOTE: Primary cooperative societies are not insured by the DICGC.