₹5 lakh DICGC bank deposit insurance: Is it enough or should the govt increase it?

Deposits are crucial for any bank, as these are further given out as loans. Hence, it is important that a depositor feels confident about the money deposited with the bank. For this, the Deposit Insurance and Credit Guarantee Corporation (DICGC), an RBI subsidiary, provides up to ₹5 lakh insurance cover to each bank depositor for the principal and interest amount. However, is this insurance cover enough, or should the government increase it? Let us discuss.

How much of the total bank deposits are insured?

According to information available on the DICGC website, as of 31 March 2025, 97.6% of the total bank deposit accounts are insured. The DICGC has insured 293.7 crore deposit accounts. So, that is very good coverage.

However, if we look at the value (amount) of deposits insured, it is low, at 41.5%. The total amount of deposits available for insurance across deposit accounts stands at ₹240 lakh crore. However, out of these, only deposits of ₹100 lakh crore are insured with the DICGC. The balance of ₹140 lakh crore is not insured, as it is part of deposit accounts with balances exceeding ₹5 lakh.

Given the low coverage of the deposit value at 41.5%, there is scope for the government to increase coverage beyond ₹5 lakh per depositor.

History of insurance cover amount

The DICGC was established under the Deposit Insurance and Credit Guarantee Corporation Act, 1961. Let us look at how the insurance coverage amount has progressed from DICGC’s inception to date.

Source: DICGC website

As per the table above, the last increase in deposit insurance coverage was made in 2020 from ₹1 lakh to ₹5 lakh. So, during the last 6 years, the insurance coverage has remained at ₹5 lakh.

Who pays the premium for deposit insurance?

The bank that holds the deposit pays the premium to the DICGC for deposit insurance. The bank depositor is not charged the premium for deposit insurance. Here is how the deposit insurance premium has increased over time.

Source: DICGC website

If and when the government decides to increase deposit insurance coverage, the premium amount payment from banks to the DICGC will increase. The higher premium outgo will impact the profitability of banks.

How much has DICGC paid in claims?

In 2024-25, the DICGC settled total claims of ₹476 crore. As of 31 March 2025, the DICGC has paid the following cumulative claims:

1. ₹296 crore towards 27 commercial banks
2. ₹10,954 crore towards 389 cooperative banks

So, a majority of the amount has gone towards settling claims of cooperative banks.

In February 2025, the RBI imposed restrictions on New India Cooperative Bank following the uncovering of a ₹122 crore fraud. During this time, M Nagaraju, Secretary, Department of Financial Services, had said at a press conference that the government was actively considering raising the deposit insurance limit of ₹5 lakh.

However, in July 2025, Pankaj Chaudhary, Minister of State for Finance, in a written reply, addressed the question of increasing the ₹5 lakh insurance limit on bank deposits. He referred to Core Principle 8 of the International Association of Deposit Insurers (IADI). As per this principle, 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 added 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.

In October 2025, in its monetary policy, the RBI mentioned introducing a risk-based premium framework for DICGC insurance for deposits. At present, the DICGC charges a flat ₹0.12 premium per ₹100 deposit insured. The existing system doesn’t differentiate between banks that manage risk better. The risk-based premium model will help sound banks save significantly on their premium payment.

On 6 February 2026, the RBI announced the Risk-Based Premium (RBP) Framework for deposit insurance. For banks that manage risks better, the framework provides a maximum risk model incentive of up to 33% on the card rate. Banks without any major distress or claim payouts from the DICGC shall be provided a maximum vintage incentive of 25% on the card rate. The RBP Framework shall be effective from 1 April 2026 and will be reviewed at least once in three years.

How can depositors avail insurance beyond ₹5 lakh?

In the earlier section, we discussed how the DICGC insures 97.6% of the total bank deposit accounts, but only 41.5% of the value (amount) of deposits are insured. Depositors with a balance in excess of ₹5 lakh in a single deposit account will benefit if the government increases the deposit cover beyond ₹5 lakh. However, it seems there is currently no proposal under consideration to increase deposit insurance cover beyond ₹5 lakh.

So, if you have a deposit of more than ₹5 lakh in a single account and wish to avail of a higher insurance cover, you can consider the following options:

1. Spread your deposits across multiple banks, keeping ₹5 lakh in each bank.
2. Spread your deposits across different types of ownership accounts with the same bank

With the same bank, a person can hold multiple deposit accounts in different capacity and different right, and get separate deposit insurance coverage of up to ₹5 lakh for each of these accounts.

Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached on LinkedIn.