How much of your bank account deposits are secured?

The money in your bank account is covered under the deposit insurance scheme up to Rs. 1,00,000.  i.e. if the bank is wound up or liquidated (closed), money kept with the bank to the extent of Rs. 1,00,000 is secured and shall be paid back to the account holder under the deposit insurance scheme.

However, the above limit can be increased to one’s benefit if right set of accounts are open with the bank.  For a family of husband, wife and a child, there is a possibility to cover up to Rs. 7,00,000 under the deposit insurance scheme.  Hence it is necessary to understand this scheme to know which types of accounts are covered and how the limit of Rs. 1,00,000 is determined.

Which banks are covered under the scheme?

There is a belief that this benefit is available only if one has money in public sector banks.  However, it is not so.  All commercial banks including private sector banks and branches of foreign banks functioning in India are covered under the scheme.  Further all co-operative banks other than those from the states of Meghalaya, Mizoram, Nagaland and Union Territories of Chandigarh, Lakshwadeep and Dadra & Nagar Haveli are covered.

How is the limit of Rs. 1,00,000 is determined?

Deposits of each depositor in a bank is insured up to maximum of Rs. 1,00,000 for both principal and interest amount held by him in the same right and same capacity.

Let us analyse the implication of the underlined words in the above statement.

Deposits include savings, fixed, current and recurring deposits.  Thus all types of deposits which we generally keep with the bank are covered under the scheme.

Deposits of each depositor in a bank means the limit is bank specific.  Thus if you have accounts in two different banks, then both are covered to the extent of Rs. 1,00,000 separately.  However, remember that it shall not help if you spread your amount in different branches of the same bank.  The limit specified is per bank and not per branch.

Rs. 1,00,000 limit covers both the principal and interest amount.  For example, if you had a fixed deposit of Rs. 95,000 on which interest of Rs. 8000 has been accrued over a period of time, your deposit in the bank totals to Rs. 1,03,000 and it shall be covered to the extent of Rs. 1,00,000.

Same right and same capacity

Deposits which are held in the same right and same capacity are aggregated to calculate Rs. 1,00,000 limit.  What does one mean by ‘same right and same capacity’?

If you have a savings account and a fixed deposit account in your name, both the accounts are considered in the same right and same capacity and the insurance coverage under the scheme shall be limited to Rs. 1,00,000.

Now suppose, you have a joint account along with say your spouse.  This account is considered in a different right and different capacity and the insurance coverage is provided separately.  Thus in this case the total coverage shall be Rs. 2,00,000 (Rs. 1,00,000 for the amount in savings and fixed deposit account and Rs. 1,00,000 for the amount in joint account).

Next obvious question which arises is whether the order of names appearing in joint account affects the insurance cover?  The answer is no and all the joint accounts with same names (though in different order) are clubbed and the limit of Rs. 1,00,000 apply to them. 

Examples given by RBI to understand the concept of same right and same capacity

Coverage of deposits held in joint account

Account (i)	1st holder: Shri A. K. Sharma 2nd holder: Smt. B. Sharma	Maximum insured amount up to Rs. 1,00,000
Account (ii)	1st holder: Shri A. K. Sharma 2nd holder: Shri P. Sharma	Maximum insured amount up to Rs. 1,00,000
Account (iii)	1st holder: Smt. B. Sharma 2nd holder: Shri A. K. Sharma	This Account will be clubbed with Account (i)
Account (iv)	1st holder: Shri A. K. Sharma 2nd holder: Smt. B. Sharma 3rd holder: Shri P. Sharma	Maximum insured amount up to Rs. 1,00,000
Account (v)	1st holder: Smt. B. Sharma 2nd holder: Shri P. Sharma 3rd holder: Shri A. K. Sharma	This Account will be clubbed with Account (iv)

Source: RBI

Accounts held in different capacities

Account Name	Savings	Current	FDs	Total Deposits	Deposits Insured
S K Pandit (Individual)	17,200	22,000	80,000	1,19,200	1,00,000
S K Pandit (Partner of ABC & Co.)		75,000	50,000	1,25,000	1,00,000
S K Pandit (Guardian for Master Ajit)	7,800		80,000	87,800	87,800
S K Pandit (Director, J K Udyog Ltd)		2,30,000	45,000	2,75,000	1,00,000

Source: RBI

From the above, it can be seen that by having combination of accounts one can increase the insurance coverage.  For a family of husband, wife and a child, one can have three individual accounts in each of their names.  Further one can have four joint accounts in the combination of husband, wife and child’s name.  Thus one can have seven accounts all in different rights and different capacities and insurance cover of Rs. 1,00,000 shall apply to each of them separately and total cover of Rs. 7,00,000 shall be available.  And remember all in one bank!!