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Enhance insurance of bank deposits with this simple trick

Many of you are aware, that your money lying with a bank is insured up to a sum of Rs.1 lakh.

However, what very people know is that this limit was last revised in 1993. Isn't it shocking that the Govt. has simply not bothered to enhance the insurance cover for over more than 22 years.

Given the inflation over the last two decades, this insurance cover is negligible and meaningless in the current times.

The concept of insuring your bank deposits began in the year 1962, with a cover of Rs.1,500/- per person. In the initial years, the Govt. was fairly regular in revising this amount; as detailed below:

1968 : Rs.5,000/-
1970 : Rs.10,000/-
1976 : Rs.20,000/-
1980 : Rs.30,000/-
1993 : Rs.1,00,000/-

Since then, unfortunately the Govt. has gone into a deep sleep mode. Ideally, to maintain parity with the 1993 amount, in 2015 this cover should have been at around Rs.5.50 lakhs.

I wonder what the Deposit Insurance and Credit Guarantee Corporation (DICGC), which is responsible for providing this insurance cover on our bank deposits, has been doing all these years.

Even the Reserve Bank of India, of whom DICGC is a wholly owned subsidiary, seems to have done nothing about it.

I wish something were done on this front, as soon as possible.

Meanwhile, let's look at the salient aspects of this bank deposit insurance and how you can increase the cover — of course, legally — on your deposits.

1. All your money with the bank, whether in savings account, fixed deposit, current account, recurring deposit, etc. plus the accrued interest thereon, is insured. For example, if your fixed deposit is Rs.95,000 and interest accrued is Rs.6,000, you will receive Rs.1 lakh as against your total amount of Rs.1.10 lakhs.

2. Various amounts held by you — across all the branches of the concerned bank put together — are aggregated . It is NOT as if your amount with each "different branch of the same bank" is separately insured. But yes, your amount with each "different bank" is separately insured.

3. In this process, if any dues are payable by you to the bank, the same would be deducted from this total amount held by you. So, if in the example given in Point 1 above, Rs.2,000 is due towards the bank, you will receive only Rs.99,000 under insurance. 

4. Insurance cover applies on the net amount held by you in the "same right and same capacity", as on the date when the bank goes bankrupt or is merged with some other bank. [Imp: See explanation on this below]

5. As per the rules, DICGC has to pay the insurance amount within two months, from the date it receives the depositors' list.

6. Presently all commercial banks, local area banks, rural banks, foreign bank branches and co-operative banks in India, are covered under this scheme of DICGC...
... except the co-operative banks of Meghalaya, Chandigarh, Lakshadweep and Dadra & Nagar Haveli.

7. The list of insured banks and those de-registered is available on DICGC's website. As you will note, there are nearly 200 de-registered co-operative banks across the country. And, nearly half of those are from Maharashtra. So, beware! Your money with co-operative banks is at huge risk.

8. By the way, the premium for deposit insurance is borne by the bank.

Are you concerned whether your Bank Deposits are adequately Insured or not?

What does "same right and same capacity" mean?
Given that bank accounts / deposits are held as single account, joint account and in different capacities, it is important to understand the concept of "same right and same capacity".

Case 1: All amounts i.e. savings, current, FD, RD, etc. across various branches of the bank, held by you in your individual name, would be treated as in "same right and same capacity" and considered as one total amount for insurance purposes. 

This includes the amount held in the name of a proprietary concern, where the depositor is the sole proprietor and the amount is held in the individual capacity. 

Case 2: But each of your accounts in the following cases, would be treated as held in "different right and different capacity"
- Account held in the capacity of a partner of the firm
- As a guardian of a minor
- As a director of a company
- As a Trustee
- As a Joint Account

Thus, each of these will be separately insured.

Case 3: Where people hold many joint accounts:
- They would be treated as under "same right and same capacity", if their names appear in the same order. For example, amounts under all accounts with Names A, B and C in the same order, will be treated as one total amount.

- They would be treated as under "different right and different capacity", if their names are not in the same order. For example, accounts with A, B and C; C, B and A; C, A and B; A, C and B; etc. would be treated as different accounts.

- They would be treated as under "different right and different capacity", if the group of persons are different. For example, accounts A, B and C and A, B and D are different accounts.

So, now you know, how you can mix and match the names of you, your spouse and children to ensure that each account is separately insured.

Beware: For income tax purposes, ALL accounts would be treated as "yours" (assuming it is your money in all these accounts). This comes under the clubbing provisions of the Income Tax Act.

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