Bank FD: Do you have ₹10 lakh in your account? Find out how to secure your money while earning higher returns through an FD..

Bank FD Rules: Fixed Deposits (FDs) are generally considered the safest investment with the lowest risk. However, if you have savings of ₹10 lakh or ₹20 lakh and are investing them in an FD, there is a crucial rule you must know. The rule is that if your entire amount is deposited in a single bank, your total funds are not fully protected.

The Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India, provides insurance cover of up to a maximum of ₹5 lakh per depositor, per bank. This ₹5 lakh limit includes both the principal amount and the interest earned.

**Opening multiple FDs in the same bank does not increase insurance cover**

People often assume that by opening five separate FDs of ₹2 lakh each in the same bank, their entire ₹10 lakh fund will be secured. However, according to DICGC rules, this is not the case:

*   **Tagging/Calculation of funds:** If you hold multiple FDs in the same bank, the DICGC aggregates them all when calculating the insurance cover.

*   **Savings Account + FD:** Suppose you have three FDs of ₹2 lakh each (total ₹6 lakh) and ₹1 lakh in a savings account in the same bank; your total deposit would be considered ₹7 lakh. However, in the event of the bank failing or facing a crisis, you would receive a maximum of only ₹5 lakh back.

*   **Interest included:** If your principal amount is ₹4.8 lakh and the accrued interest pushes the total amount beyond ₹5 lakh, the insurance cover will still not exceed the ₹5 lakh limit.

*   **Different branches:** Opening accounts at different branches of the same bank does not alter the insurance limit.

**How ​​can you make your money 100% safe?**

If you have a large sum of money, adopt these strategies to minimize your risk:

Distribute funds across different banks: The DICGC treats each insured bank as a separate entity. For instance, if you split a sum of ₹15 lakh into three separate Fixed Deposits (FDs) of ₹5 lakh each across three different banks, your entire amount (₹15 lakh) would be protected under the individual insurance cover of ₹5 lakh for each bank.

Different legal capacities: If accounts are opened in the same bank under different ownership or capacities (such as an individual account, a joint account, or an HUF account), they may be eligible for separate insurance coverage under the rules.

What happens when a bank faces a crisis?

The DICGC insurance framework comes into effect in the event of a bank's liquidation or the imposition of restrictions by the RBI. The concerned bank is required to submit depositor details within a specified timeframe. Subsequently, the depositor's claim is processed in accordance with legal procedures, and a payout of up to a maximum of ₹5 lakh is made.

Keep these points in mind before opening a large FD:

Check total exposure: Calculate the total amount you hold in a single bank (savings + FD + RD).

Allocation strategy: Invest large sums—such as ₹10 lakh or ₹15 lakh—by distributing them across at least two or three different scheduled banks.

Other factors: When selecting a bank, consider not only insurance coverage but also interest rates, lock-in periods, and rules regarding premature withdrawal.

Disclaimer: This content has been sourced and edited from Money Control. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.