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Insurance limit for each depositor in a bank is capped at Rs.1 lakh, including both principal and interest amounts. In case a bank goes into liquidation, depositors get the insurance money as per their deposits for a maximum of up to ₹1 lakh. The same math applies if a failed bank is amalgamated, merged or reconstructed. If a person keeps the deposits in different branches of a bank, they are paid a maximum of up to Rs.1 lakh only on the aggregate amount.
A single-ownership account or an account owned by a single person will only get an insurance cover of a maximum of up to ₹1 lakh irrespective of funds kept in one or more branches of the same bank. The DICGC adds all funds held in different branches before determining the deposit insurance. In case of different types of ownership, the corporation would insure them separately. If a depositor has two separate accounts in two banks and both shut down, then they are covered separately.
If individuals jointly hold more than one deposit account in one or more branches of a bank and if their names are registered in the same order everywhere, then all these accounts are considered as one. The DICGC calculates the deposit insurance for such depositors by adding funds from all the branches and allowing insurance of up to ₹1 lakh on the aggregate amount.
The deposit insurance scheme is mandatory for all banks and no bank can voluntarily withdraw from it. However, the DICGC has the power and right to cancel the registration of an insured bank if it fails to pay the premium for three consecutive half-year periods. If a bank is no more under the DICGC’s coverage following the defaults, then depositors are notified through newspapers.
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