Bank FD Insurance: What Happens If You Invest More Than ₹5 Lakh?

Bank fixed deposits (FDs) are popular because many people consider them a secure way to keep their money. But there is a limit to the insurance protection available on bank deposits.

If a bank fails, the Deposit Insurance and Credit Guarantee Corporation (DICGC) provides insurance cover on eligible deposits. Here is how the ₹5 lakh FD insurance limit works.

DICGC Insurance Cover on Bank FDs

Under DICGC rules , eligible deposits with a bank are insured for a maximum of ₹5 lakh. This limit includes both the principal amount and interest earned on the deposit.

For example, if your eligible FD amount is ₹5 lakh, it falls within the maximum insurance cover. But if your FD amount is more than ₹5 lakh, the insurance protection does not increase beyond ₹5 lakh.

So, keeping a larger amount in one bank does not mean the entire amount gets insurance protection.

The ₹5 Lakh Limit Is Per Bank

The ₹5 lakh insurance limit applies separately to each bank.

For instance, if you have ₹5 lakh or less in eligible deposits with one bank and another ₹5 lakh or less with a different bank, the deposits can have separate insurance coverage because they are held with different banks.

This means the insurance limit is linked to the bank, not simply to the depositor.

Different Branches Do Not Increase the Limit

Opening FDs or savings accounts at different branches of the same bank does not provide an additional ₹5 lakh insurance limit.

Eligible deposits held with the same bank are considered together when determining the insurance coverage. Therefore, spreading your money across several branches of one bank does not increase the insurance limit.

What If You Have ₹15 Lakh?

Suppose you have ₹15 lakh to invest in bank FDs. Keeping the entire amount with one bank does not mean the full ₹15 lakh gets insurance protection.

If the amount is instead deposited across different banks, the applicable insurance limit can be considered separately for each bank.

Therefore, when investing a large amount in FDs, understanding the DICGC insurance limit can help you decide how to distribute your deposits across banks.

Disclaimer: This article is for information purposes only. DICGC rules and insurance limits may change. Please verify the latest applicable rules before making any financial decision.