Explain what is Deposit Insurance?

Deposit insurance is a feature which provides protection cover to bank account holders. The purpose of deposit insurance is to protect deposit holders when the bank fails and is unable to pay money to its depositors. The insurance protection is given by Deposit Insurance and Credit Guarantee Corporation (DICGC) which is a wholly owned subsidiary of the Reserve Bank of India (RBI).

All bank deposits such as savings, current, fixed and recurring are protected. DICGC insures up to a limit of 5 lakhs per bank. If you have a total deposit of more than 5 lakhs, then you will be able to get only 5 lakhs (principal + interest) if the bank goes bankrupt.

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