Online Share Trading

What if the Banks are closed?

Have you ever wondered what would happen if one of your banks closed down?

Let's suppose you have money at a large bank. You might have an SB account or a current account. This bank. What happens if the bank closes down?

What happens is that there's something called DICGC coverage. DICGC stands to Deposit Insurance and Credit Guarantee Corporation. These corporations were created to protect the public's faith in the banking system, and to prevent a Bank run.

Bank runs or bank runs are situations where depositors rush to the bank to withdraw their funds. They fear that the bank will become insolvent soon or cease to exist. It eventually leads to default as more depositors withdraw money. This further triggers withdrawals which could lead to bank bankruptcy.

Corporations like DICGC help depositors feel at ease. They know that even if a bank goes under, they still have the DICGC coverage. The Reserve Bank of India issued a credit line of credit totaling INR 50 million to the DICGC.

What's DICGC ??

The apex monetary institution owns and subscribes to DICGC, with its Mumbai headquarters. It was created under the 1961 DICGC Act. This Act guarantees credit facilities and offers insurance on deposits.

DICGC offers deposit insurance to protect depositors in the event that a bank fails to pay its deposits. It provides credit guarantee and deposit insurance to small depositors.

History DICGC

Although the DICGC was founded in July 1978, it was the 1948 banking crisis in Bengal that brought to light the idea of protecting deposits held with banks. RBI, the apex monetary authority, introduced measures to ensure banks' scrutiny. This idea was supported by the Rural Banking enquiry panel in 1950. This idea was first seriously considered by the RBI and government of India in 1960, after the collapses of two major Indian banks, Palai Central Bank Ltd. and Laxmi Bank Ltd.

The Deposit Insurance bill was introduced to parliament on 21 August 1961. Initially, the DIC corporation scheme covered only commercially-operating banks like the State Bank of India or branches of banks headquartered in India.

The DICGC was created on 15 July 1978 when the RBI decided that the two organizations, which were credit guarantee (CGCI), and deposit insurance (DIC), should be merged.

What does the DICGC company do?

The DICGC Act 1961 established the corporation on 15 July 1978. It provided insurance for deposits and guarantees towards credit facilities.

The Reserve Bank of India fully subscribed and issued the management capital of DICGC at INR 50 crore. The chairman of DICGC is the Deputy Governor of RBI.

This scheme covers the maximum amount of insurance for every depositor at INR 5 lakhs. This includes both principal and interest amounts.

These are the banks that are covered by the deposit insurance program

  • All commercial banks
  • LABs (Local Area Banks)
  • RRBs (Regional Rural Banks).
  • Branch offices of foreign banks
  • These co-op banks include
  • State Co-op Banks
  • Urban co-op bank
  • Banks for district co-op

All bank deposits, such as those in the DICGC, are covered by the DICGC

  • SB account
  • Current account
  • Fixed deposits
  • Recurring deposits, etc.

Types of deposits that are not covered by the DICGC scheme

  • Central/State Governments deposits
  • SLD deposits at the State Co-op Banks. SLD stands for State Land Development Banks
  • Inter-bank deposits
  • Foreign governments deposits
  • Corporation exempted amount after RBI's approval


Section 15A of DICGC Act states that a bank may lose its registration under the DICGC scheme if it fails to pay three consecutive premiums. Public notices are sent to the public by newspapers when DICGC cancels coverage for a bank.

DICGC Frequently Asked Questions

1. How can I find out if my bank is included in the list of banks that are insured by DICGC

After registration, the printed leaflets are sent to all banks that have been insured by DICGC. Leaflets are used to provide information about the DICGC protections for bank depositors. Bank officials at the branch may be contacted if there are any questions.

2. Maximum amount of money that can be deposited in different branches of the bank by an account holder?

If a customer has accounts at different branches of the bank, then deposits are consolidated and a maximum of INR 5 Lakhs is paid.

3. Is DICGC coverage available for both principal and interest?

Yes, DICGC covers principal and interest up to INR 5 Lakhs.

See the following example:

An FD of INR 485 000 is earned by someone who has a FD of at least INR 485,000. If the person has an FD of INR 4,85,000. The bank must pay INR 5,05,000. If the bank fails, however, the DICGC will cover insurance for up to five lakhs. All amounts exceeding INR 5 Lakhs will not be covered. This is because the maximum amount that is insured under the DICGC scheme, INR 5,00,000.

4. Is it possible to insure a depositor who has accounts at more than one bank?

Yes. Yes. Customers' deposits at different banks can be insured separately.

A customer who has deposits at ABC bank or XYZ banking would have an insurance coverage limit of up to five million.

5. What happens if a customer has more than one account with a bank?

If a person has multiple accounts at the same bank, such as a joint account with a family member or an individual account, then DICGC will pay the maximum amount of INR 500,000 per account.

Bottom line

In the end, corporations like DICGC are what help to ensure stability and maintain depositors' faith in financial institutions in the face of a financial system failure. DICGC coverage, which provides credit guarantee and deposit insurance, is a crucial safeguard measure.

What is Online Trading?

Trading Platform/Tools

How to invest in stock market for beginners?

Online Trading vs Offline Trading

How does online trading work?

Investment management errors that commonly occurs

Introduction to Share Trading

Stock Market Terms for the beginners.

What is the power of Compounding?

What is Limit order and how does it works?

What is Stop Loss?

What is SIP in share market?

What is Value Investing ?

Stock trading Terminologies

India Brokerage Charges

Basics of Forex Trading

Options for Investment after Retirement

Difference between Order book and Trade book

What is Radar signal Trading system?

What is Moving Averages?