Fixed Deposits, or FDs, are one of the few traditional investment options helping an individual make a safe investment. IT is a risk-free investment with guaranteed returns. FDs offer interest rates of up to 5-7%, thus beating inflation which is currently at 5.1%. However, as the safety of money cannot be negotiated, a lot of investors wonder if fixed deposits are insured. So, let us deep dive into the topic.
The only risk that follows with fixed deposit investments is the bank going bankrupt or defaulting. For such extreme situations, each depositor is insured up to a maximum of ₹5 lakh (for both principal and interest). In case you have multiple fixed deposits with several banks, the insurance coverage cap is separately applied to the amount in every bank.
The Deposit Insurance and Credit Guarantee Corporation (DICGC) offers insurance cover on deposits such as savings accounts, fixed deposits, current accounts, recurring deposits (RD), etc. As per the latest developments, the DICGC now insures principal and interest up to a maximum amount of ₹5 lakh. For instance, if an individual had an account with a principal amount of ₹4,95,000 plus accrued interest of ₹4,000, the total amount insured by the DICGC would be ₹4,99,000.
All funds held under a given name/ownership type in the same bank are combined together before the deposit insurance is decided. If the deposits are in different names/ownership or are deposited in different banks, they would be insured separately.
The DICGC insures all banks, including local area banks, regional rural banks and branches of foreign banks that function in India. However, there are certain exceptions.
The following are the types of deposits that are not insured by the DICGC:
Deposits of state/central governments
State land development banks with the state co-operative bank deposits
Any deposits that are received outside of India
Deposits of foreign governments
Any amount that has been exempt specifically by the corporation with the earlier approval of the RBI
For FD insurance to work, the DICGC has a certain set of rules:
Banks must pay a premium for the insurance cover; meaning that the DICGC does not charge any premium from bank depositors/FD account owners.
The ₹5 lakh limit covers both the principal and interest amounts.
A depositor can only receive the insurance cover on liquidation of the bank. Fixed Deposit insurance cannot be provided if the bank is functional.
If a user has multiple fixed deposits in various branches of a single bank, and the bank's failure is declared, all deposits with the institution will be clubbed. It means that the depositor will be paid a maximum of up to ₹5 lakh and nothing more.
If you have multiple fixed deposits in different banks, the deposits maintained with different banks are not clubbed.
The investment journey requires a lot of planning and understanding of the market, especially when you have to tackle inflation and unpredictable market movements. Every investor is looking for the best schemes to invest their money securely. This is why, in February 2020, the sum insured under the DICGC was increased from ₹1 lakh to a maximum of ₹5 lakh. Investing in fixed deposits is much safer now than ever before. While your money is safely invested, you can get better returns with appealing interest rates from Bajaj Finance Fixed Deposit schemes. The minimum deposit amount on Bajaj Finance FD starts from ₹15,000. Apply on Bajaj Markets today!
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Yes, there is fixed deposit insurance on fixed deposits that are invested in banks.
Your fixed deposit investment with a bank is insured with the DICGC scheme, which covers your deposits up to Rs.5 lakhs.
Life insurance and FDs are common investment avenues that help you with securing your finances. You can purchase life insurance only from an insurance provider whereas in the case of FDs, you can invest in fixed deposits with NBFCs, banks and other financial entities. The fundamental difference between them is that fixed deposit is an investment whereas life insurance is a risk cover.
The DICGC only insures deposits made in banks. It does not insure deposits that are made in NBFCs.
All of the deposits that you make in the bank are insured up to Rs.5 lakhs. Likewise, if you also invest with another bank, that amount will also be separately covered.