Deposit insurance demystified: Exploring the future of bank deposit safety

From a risk perspective, it is better to spread your deposits across multiple banks, given the extent of the current deposit cover

After the blowout at the Mumbai-based New India Cooperative Bank, the spotlight is once again on bank deposit insurance.

M Nagaraju, Secretary, Department of Financial Services, has said this coverage is under review. Some speculation suggests a hike to ₹15 lakh may be in the offing from the current ₹5 lakh. However, not many are familiar with the finer aspects of deposit insurance, and even fewer understand the role of the executing agency, the Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India (RBI). 

For instance, the bank deposit insurance limit of ₹5 lakh is