Is your money 100% safe in an FD? Learn what bank regulations say.

Bank FDs are considered safe investments, but according to RBI regulations, DICGC insurance only provides coverage up to ₹5 lakh. Only by spreading your investments across multiple banks can you create a complete security shield. Learn about bank regulations, safety measures, and ways to safely invest in FDs.

In today's world, when there are so many investment options available, fixed deposits (FDs) remain a favorite choice for Indian investors. The main reason for this is that they are considered a safe investment, offering a fixed return. But is your money in an FD truly 100% safe? This is a question that many investors have. Let's understand bank and RBI regulations, DICGC insurance, and all the related aspects so you can be fully informed about your investments.

RBI Rules for FD Protection

The Reserve Bank of India (RBI) operates every bank under strict regulatory rules. This means that the likelihood of any bank collapsing is extremely low. However, if a bank's license is revoked or it goes bankrupt for any reason, depositors are protected to a certain extent. This protection is provided under the Deposit Insurance and Credit Guarantee Corporation (DICGC). The DICGC is a wholly-owned subsidiary of the Reserve Bank of India (RBI) that insures your deposits in banks.

DICGC Insurance – How Much Coverage Is It?

The Deposit Insurance and Credit Guarantee Corporation (DICGC) provides insurance on all deposits, including your FD, savings account, current account, and recurring deposits.
The DICGC provides insurance up to ₹5 lakh per depositor per bank.
This amount includes both principal and interest.
If you have multiple FDs with the same bank, you'll only receive coverage for up to ₹5 lakh, taking the total of all of them into account.

Example:

Suppose you have an FD of ₹4 lakh with Bank A and have ₹1.5 lakh in your savings account. The bank closes down. In this situation, the DICGC will only guarantee up to ₹5 lakh. This means you'll get back ₹5 lakh, with the remaining amount dependent on the disposal of the bank's assets.

Does this protection apply to all types of banks?

Yes, DICGC insurance coverage applies to all commercial banks operating in India (Indian branches of nationalized, private, and foreign banks), all regional rural banks (RRBs), and all cooperative banks. However, it doesn't apply to some cooperatives and non-banking financial companies (NBFCs). Therefore, before investing, ensure that the bank falls under the DICGC's purview.

When is the insurance amount received?

If the RBI cancels a bank's license and the bank ceases operations, the DICGC initiates the process of disbursing the insurance amount to depositors within 90 days. Payments are typically made within 2-3 months.

Are FDs completely risk-free?

Technically, FDs are low-risk investments, but they are not 100% safe.

Amounts above ₹5 lakh are not guaranteed.

If you have a large amount of money in a single bank, the remaining amount may be at risk.

Avoid keeping large amounts of money in a single bank for a long period of time.

How to make your investments more secure?

Diversification: Invest in different banks to receive ₹5 lakh insurance cover from each bank.

Government Banks Preference: Public sector banks have a relatively low default risk.

Choose the tenure: Avoid very long-term FDs; 1-3 year FDs are preferable given the cycle of interest rates.

Interest reinvestment: Transfer interest to a savings account so that the total amount does not exceed ₹5 lakh.

FAQs

Q1. Are FDs completely safe?

FDs are low-risk investments, but not 100% secure, as the DICGC only covers up to ₹5 lakh.

Q2. Which accounts are covered by DICGC?

FDs, savings, current, and recurring deposits.

Q3. If the FD is worth ₹10 lakh, how much money is protected?

Only up to ₹5 lakh (principal + interest) is guaranteed.

Q4. When and how is the insurance claim received?

If the RBI cancels a bank's license, the DICGC makes direct payments within 2-3 months.

Q5. What are some ways to make your FD more secure?

Spread the amount across multiple banks, choose a public sector bank, and transfer the interest to your savings account.