When a bank fails, the only respite a depositor has is the insurance cover offered by the DICGC. This cover was raised to Rs 5 lakh from Rs 1 lakh, effective from February 4, 2020.

According to the Reserve Bank of India's (RBI) latest annual report the number of fully protected accounts in banks stood at 247.8 crore at end March 2021, which is 98.1 per cent of the total number of accounts (252.6 crore). What this means that around 4.8 crore accounts do not enjoy the deposit insurance cover offered by Deposit Insurance and Credit Guarantee Corporation (DICGC).

Deposit amount coverage much lower than account coverage

As per the annual report released by RBI the total insured deposits stood at Rs 76,21,258 crore as at end-March 2021. This is only 50.9 per cent of the assessable deposits of Rs 1,49,67,776 crore. What this means that around 49.1% of the amount deposited with banks do not enjoy the DICGC cover.

While the deposit insurance cover on bank deposits has been raised to Rs 5 lakh, not all deposits are covered. Though this cover is available to all banks, they have to register for this facility and pay the corresponding insurance premium to keep enjoying the financial protection under this deposit insurance.

Banks not being registered with DICGC or not paying premium are the main reasons for deposits not being covered, according to the RBI annual report. However, this can also happen in case of a higher deposit amount held by an account holder in the same right and capacity. For instance, if you hold a total deposit of Rs 25 lakh in same right and capacity then the maximum cover will remain only Rs 5 lakh and remaining R s20 lakh deposit will not have this protection.

Failure mainly in co-operative and local area banks
As per the annual report, five cooperative banks and one LAB (or Local Area Bank) were liquidated during the year 2020-21.


As per the un-audited data, the DICGC has processed claims amounting to Rs 993 crore during 2020-21 with a view to ensuring payment to insured depositors of liquidated banks under the prevailing pandemic situation. Of Rs 993 crore, the Corporation has settled claims amounting to Rs 564 crore in respect of nine co-operative banks during 2020-21.
 
An amount of Rs 330 crore has been settled in case of one cooperative bank in April 2021. However, the net outgo of funds towards settlement of claims from the Corporation was also lower as there was a recovery of Rs 568 crore during 2020-21.

Added to this, there was an amalgamation of a struggling private sector bank Lakshmi Vilas Bank and a foreign bank Development Bank of Singapore (DBS) during 2020-21.
 
Check if your bank deposit is protected
Deposit insurance provided by the DICGC covers all insured commercial banks, including LABs, PBs, SFBs, RRBs and co-operative banks. As per the report, the number of registered insured banks stood at 2,058 as on March 31, 2021. This includes 139 commercial banks out of which 43 are Regional Rural Banks (RRBs), 2 are Local Area Banks (LABs), 6 are Payment Banks (PBs) and 10 are Small Finance Banks. Apart from this 1,919 co-operative Banks (UCBs).
 
Despite this there are good number of banks mostly co-operative which are not registered with DICGC to offer the insurance cover to their depositors. If you have a deposit in a co-operative bank, you need to check if it is registered for the deposit insurance.