What will happen to your money if a bank in India collapses? How much compensation does the government give

Recently two big banks of America have gone bankrupt. In such a situation, the question in the mind of the people is that if this happens in India then what will happen to the money of the customers?

business

oi-Rahul Kumar

Updated: Saturday, March 18, 2023, 17:19 [IST]

America’s banking sector is badly engulfed in crisis. 2 big banks have been locked one after the other. First Silicon Valley Bank and then Signature Bank went down. At the same time, the condition of another European bank Credit Suisse is also not good. Customers all over the world are scared due to the continuous sinking of banks. They are worried about their money. It is bound to be a similar concern for people in India as well.

In the last few years, customers of banks like PMC and Lakshmi Vilas had to face difficulties. Here, many co-operative banks in the country are facing various problems. In the midst of all these news, one suddenly comes that such and such a bank has sunk. Due to which people’s lifetime earnings get drowned. But the Government of India has made many rules to deal with such situation. Under these rules, a fixed amount is given to the customers.

These are the new rules of the government

In the year 2020, the central government had changed the Deposit Insurance and Credit Guarantee Corporation Act. After this, the guarantee of deposits in the bank was increased from one lakh rupees to five lakh rupees. Earlier, in the event of bank collapse, the account holders used to get a guarantee of deposit up to a maximum of Rs 1 lakh. In 2020, the government increased it to five lakh rupees. That is, if the bank account in which your money is deposited sinks, then you will get back the amount of five lakh rupees as insurance. The government had amended the law related to deposit insurance after 27 years.

Insurance is available on these accounts
In India, the Deposit Insurance and Credit Guarantee Corporation Act (DICGC) provides insurance cover to people’s money deposited in banks. It includes all types of deposits including savings account, current account, recurring account. The customers of every commercial bank and co-operative banks in India get the benefit of the insurance cover of the Deposit Insurance and Credit Guarantee Corporation Act.

What if you have multiple accounts in one bank?
A security guarantee of Rs 5 lakh on bank deposits means that no matter how much money you deposit in a bank, but if the bank fails, you will get back only Rs 5 lakh as insurance. But even if you have multiple accounts or different types of accounts in the same bank, the compensation from DICGC in case of bank failure will be limited to Rs 5 lakh only.

For example, you have a savings account in a bank and you have also got an FD. Money of 5-5 lakhs is deposited in all three. Even then you will get only 5 lakh rupees. Same if there is 2 lakh rupees in the bank, then the bank will give you only 2 lakh rupees as compensation, not five lakh rupees.

in how many days will you get the money
Suppose your money is lost due to the collapse of a bank, then under the Deposit Insurance and Credit Guarantee Corporation Act, the depositors will get the money back within 90 days after the RBI imposes a moratorium on the bank. In India, the money of 98 percent of the depositors of banks has the protection of insurance. DICGC is responsible for making payments to all account holders. DICGC takes installments in return from the banks for taking the guarantee of this amount.

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