What happens to your savings if your bank fails

After the unexpected decision of The Reserve Bank of India to put Punjab and Maharashtra Cooperative Bank (PMC Bank) under scrutiny and strict directions for six months, the depositors of the bank are into a huge snag. But, the question is- how much safe is our money when it comes to cooperative banks these days? What will happen to depositors’ money if a bank suddenly fails or shuts down? 

 

So, we are here to guide you about the consequences, and clear the facts about the deposit insurance which one can claim to get the insurance cover during banks financial crisis. 

 

• A depositor should understand that the Reserve Bank of India has a regulative norm which states that the money of the depositors is safe with the bank

• It is mandatory for all the banks to do Deposit Insurance

• As per RBI’s norm-Public, Private or Foreign banks (all Indian branches) are covered under the Deposit insurance scheme

• No matter whatever the situation comes, banks are not allowed to withdraw the insurance money of the depositor 

• Each depositor gets sum of rupees 1 lakh as insurance cover

• Insurance from the bank are for savings, fixed, current and recurring deposits

• Customers are insured for both principle and the interest amount which accumulates

 

• The insurance which protects the depositor’s money with the bank is under The Depositors Insurance and Credit Guarantee Corporation (DICGC)

• The premium of the insurance cover is paid by the bank and the depositor should not worry about their money

• Each depositor gets insurance cover of upto Rs 1 lakh on their principle and interest deposits both

• Remember, any amount above 1 lakh rupees will not be covered under the DICGC insurance scheme

• The premium is paid by all the banks to DICGC, and not by the depositor

 

• One can increase the deposit insurance cover money by depositing the money in different bank accounts

• Don’t put all your money in one bank account

• The different deposit bank accounts will give you the separate benefit of the insurance cover

• One can open a joint account with the name of his or her spouse name to get separate insurance cover

• Whoever will be the first holder of the joint account will get the benefit of the insurance cover

• For Example: One can hold the account in the same bank under different capacity by opening as a partner of a firm or a guardian of a minor or a director of the company or as a trustee of a trust or a separate joint account in the same bank but in different branch. Then  such accounts are considered as a separate account and one can claim the insurance cover of rupees 1 lakh separately

• Also, suppose you have deposited 70 thousand rupees as savings and 30 thousand is interest. In that case, you will get insurance cover of 1 lakh. And even if the savings amount increases to 90 thousand and interest to 40 thousand, you will not get more than 1 lakh insurance cover. Which means only 1 lakh can be claimed through insurance

• As per RBI’s direction the depositors are not allowed to withdraw more than 10,000 rupees of the total balance in every savings or current account. So, don’t panic. Talk to your bank official in person and check the insurance cover with your bank branch. 

 

Always try to keep your money safe in good fundamentally and financially strong banks. Try to avoid depositing your money in small cooperative banks. Before depositing your money- it is very much important to check the financials with the help of any finance expert. Bank NPAs plays a very vital role to prove how much banks have the capability to deal with the loan and debt. Do check the condition of the banks NPA.  If the NPAs are increasing every quarter, then that means banks may face debt and defaulter crisis in future. Last but not the least; after all it’s your hard earned money, so save it in the right place with the right approach.