Banking Safety Is More Than Just Deposit Insurance

True security in banking system depends on choosing the fundamentally strong banks

- JOYDEEP SEN

We look at banks as safekeepers of our money, which they are. The banking system in India is generally robust. As long as you keep your money with a leading bank, your money is safe. However, on paper, your money is safe up to ₹5 lakh per bank, which is known as deposit insurance. This insurance is taken care of by Deposit Insurance and Credit Guarantee Corporation (DICGC). With the latest cooperative bank failure, there are talks of increasing the coverage from ₹5 lakh to, say, ₹10 lakh.

Coverage scenario: In 1962, the deposit insurance limit was ₹1,500. It went up in stages and, in 1993, it was increased to ₹1 lakh. In February 2020, it was raised to ₹5 lakh, where it stands currently. The insurance premium—you don't have to pay, the bank pays it—was 5 paise per ₹100 in 1962. It has moved up to 12 paise now. As of March 2024, the number of banks covered by DICGC is 1,997, including 140 commercial banks (the usual ones where we keep our money) and 1,857 cooperative banks.