Depositors and account holders in banks can rest easy now - their customers money will not be used to bail out a failing bank. Finally the government announced that it has withdrawn the Financial Resolution and Deposit Insurance (FRDI) Bill from the Lok Sabha. The FRDI Bill, which caused a lot of fever among the general public, contained a 'bail-in' clause for resolution of bank failure which was discover to be against the interest of the depositors.
Now that the Bill has been dropped, status quo will prevail, i.e., bank deposits such as savings, fixed, current, recurring, etc. will continue to be insured under the Deposit Insurance and Credit Guarantee Corporation (DICGC), the deposit insurance premium which is borne entirely by the insured bank. All commercial banks including their branches of foreign banks functioning in India, local area banks, cooperative banks, and regional rural banks are undetaken the DICGC.
How much is insured?
Under the DICGC rules, each and every depositor in a bank is insured up to a maximum of Rs 1 lakh for both principal and with interest amount held in the same capacity and same right as on the date of liquidation or cancellation of bank's licence or the date on which the scheme of amalgamation or merger comes into force. The deposits kept in different branches of a bank are aggregated for the purpose of insurance cover and a maximum amount up to Rs 1 lakh is pa..
Not are only deposits of separate banks insured separately, even the ownership matters. If you have deposits with more than one bank, deposit insurance coverage limit is applied separately to the deposits in each bank. Further, all funds held in the same type of ownership at the same bank are added together before deposit insurance is determined. If the funds are in different types of ownership or are deposited into separate banks, they would then be separated.
Understand with an example,
if an individual had an account with a principal amount of Rs 100,000 plus accrued interest of Rs 4,000, the total amount insured by the DICGC would be Rs 104,000. If, however, the principal amount in that account was Rs 1 lakh, the accrued interest would not be insured, not because it was interest but due to the fact that the amount was over the insurance limit.