How far is your money safe at your bank?
Have you ever wondered whether the money you kept at your
bank is absolutely safe? Or do you rely on the government's
good sense and expect nothing to go wrong on this account?
Although not very frequent, but cases of banks not able to
repay its customers have arisen from time to time. And the
guilty banks are not always the co-operative banks only.
Let us look at this aspect a little closely. The nationalized
banks may be considered absolutely safe since the government
owns them and, therefore, the government can be expected to
step in should such a situation arise. However, in the case
of any other bank the bank's financial health can only give
you complete peace.
What happens if any of your banks turns bad? Till as late
as 1949 people lost all their money when a bank failed to
repay its customers. However there is deposit insurance available
now to make us feel better. Deposit Insurance and Credit Guarantee
Corporation would now make good your bank deposit to the extent
of the insurance cover.
All banks, whether a commercial bank, a foreign bank, a new
bank, or a co-operative bank (except in a few small states
and Union Territories), are covered by this bank deposit insurance.
When your money is not forthcoming this corporation would
step in to remedy the situation.
All deposits whether in a savings account, current account,
fixed deposits, recurring deposits, etc are covered by this
insurance. However the insurance covers all these accounts
in all branches of the bank up to Rs 1 lac per depositor.
Depositor for this purpose would mean money deposited "in
the same right and in the same capacity". For example
if all your accounts are joint in the same collection of names
they would be clubbed together. However if some of your money
is in single account, some in joint names, some in the name
of HUF and some in the name of a partnership firm they are
all different rights and different capacities, meaning entitled
to separate Rs 1 lac limits each.
Whether a bank is liquidated or merged or taken over, if
the depositor does not get back his deposits, the corporation
makes up the shortfall to the extent of the insurance cover.
However deposits received abroad is not covered by this insurance.
Liquidator submits list of all claims to the Corporation
within 3 months of assuming charge. The Corporation needs
to pay up within 2 months of receiving this list of claims.
To beat the TDS net it is common practice to split deposits
in various branches of the same bank. From the insurance point
of view all these deposits in various branches would be added
together for Rs 1 lac insurance limit.
