Deposit safety: ₹5 lakh DICGC limit covers most bank deposit accounts, not most money; here's why

Although 97.6% of bank deposit accounts across the country are covered by DICGC's ₹5 lakh insurance, not all of the depositors' money is covered by this scheme.

According to the Finance Ministry, 97.6% of deposit accounts are fully insured. However, only 41.5% of the total deposit value was insured as of March 31, 2025.

"With the present deposit insurance limit of ₹5 lakh, 97.6 per cent of the total number of deposit accounts stand fully insured and 41.5 per cent of the total value of deposits stands insured as on March 31, 2025," Union Minister of State for Finance, Pankaj Chaudhary, said in a written reply to a query in the Rajya Sabha on July 22, 2025.

The minister was responding to a query on "Whether the Government proposes to increase the limit of insurance of deposits of common people in banks from ₹ 5 lakh."

In his reply to another query on the reasons why the entire amount deposited by common people in banks cannot be insured, Chaudhary also shared the reason why only 41.5% of total deposits are covered.

Why is the limit only ₹5 lakh?

The minister said that as per Core Principle 8 of the International Association of Deposit Insurers (IADI) Core Principles, "deposit insurance coverage should be limited, credible and cover the large majority of depositors but leave a substantial number of deposits exposed to market discipline."

He further said that the deposit insurance coverage limit in India aligns with this principle, offering substantial protection to a larger number of depositors while encouraging banks to manage risks effectively. "This approach ensures that a larger number of depositors are adequately protected, aligns with international standards, and maintains the stability of the banking system."

What's the rule

Bank deposits of up to Rs 5 lakh per person are covered by deposit insurance under Section 16(1) of the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act. The deposits that are covered under this rule include your money in savings, fixed, current, and recurring deposit accounts at all the branches of a bank taken together.

"As per section 16(1) of the DICGC Act, DICGC may, from time to time, having regard to its financial position and to the interest of the banking system of the country as a whole, raise, with the previous approval of the Central Government, the aforesaid deposit insurance limit," Chaudhary said,

"Consequently, deposit insurance coverage limit was raised from ₹1 Lakh to ₹5 lakh with effect from 04.02.2020. DICGC considers its financial position and the interest of financial system of the country to make a suitable proposal to Government for enhancing the deposit insurance limit as per section 16(1) of the DICGC Act," he added.