A few days back, an image bearing a stamp of insurance cover on an HDFC Bank passbook went viral on the internet, causing panic among customers. The stamp on the passbook says that the deposit in the bank up to Rs 1 lakh is insured. “The deposits of the bank are insured with DICGC and in case of liquidation of the bank, DICGC is liable to pay each of the depositors through the liquidator. The amount of this deposit is up to Rs 1 lakh within 2 months from the date of claim list from the liquidator,” the stamp read.
However, HDFC Bank later clarified that the information was not new and the stamp was in accordance with RBI circular dated June 22, 2017. In a statement, bank said, ‘’This pertains to information about the deposit insurance cover. We would like to clarify that the information has been inserted as per RBI circular dated June 22, 2017 which requires all Scheduled Commercial Banks, all Small Finance Banks and Payment Banks to incorporate information about ‘deposit insurance cover’ along with the limit of coverage upfront in the passbook.’’
The clarification confirmed what was dreaded by many – only Rs 1 lakh of depositor’s money is safe if a bank goes bankrupt. This has trigged a lot of doubts in the mind of depositors, especially after the failure of Punjab and Maharashtra Co-operative (PMC) Bank in which the RBI had restricted withdrawal of cash.
What’s deposit insurance cover?
Deposit Insurance and Credit Guarantee Corporation (DICGC) has been set up by the central government under RBI to protect a customer if a bank fails or goes bankrupt. Each depositor in a bank gets up to a maximum of Rs 1 lakh if a bank collapses or its license is cancelled by the RBI.
Banks insured by DICGC:
All commercial banks, including branches of foreign banks functioning in India, local and rural banks are insured by the DICGC. All your deposits, including fixed, savings, current, recurring, etc, are insured for up to Rs 1 lakh. So, almost all banks provide for cover of Rs 1 lakh per depositor and rest of the deposit amount is forfeited in the rare event of a bank failure.