Archive · 29 Sep 2026
Bank FD Rules: What Happens When a Bank Fails?
A fixed deposit can still carry some risk if a bank fails.
The DICGC protects eligible deposits up to ₹5 lakh for each depositor at each bank.
This amount includes both the original money and the interest.
If you have several accounts at the same bank, their balances are usually added together.
Opening several FDs at that bank does not increase the insurance limit.
Deposits at different branches of the same bank are also generally combined.
Keeping money in different banks gives each bank a separate ₹5 lakh limit.
Some joint accounts or different legal ownership arrangements may qualify for separate coverage.
People should understand the rules and paperwork before using such arrangements.
The Deposit Insurance and Credit Guarantee Corporation insures eligible deposits up to ₹5 lakh per depositor, per bank.
The ₹5 lakh limit includes both the deposit principal and interest earned.
Savings accounts and fixed deposits held at the same bank are generally combined for insurance calculations.
Splitting money into multiple FDs or using different branches of one bank does not create separate insurance limits.
Distributing deposits across several banks can increase the amount covered by deposit insurance, subject to DICGC rules.
- Who
- Bank depositors and the Deposit Insurance and Credit Guarantee Corporation (DICGC).
- What
- DICGC deposit insurance covers eligible deposits up to ₹5 lakh per depositor, per bank, including principal and interest.
- When
- If a bank fails and deposit insurance rules apply.
- Where
- Deposits held with the same bank, including accounts maintained at multiple branches.
- Why
- To explain how depositors can reduce the amount of money exposed beyond the insurance limit.
- Insurance provider
- Deposit Insurance and Credit Guarantee Corporation (DICGC)
- Coverage limit
- Up to ₹5 lakh per depositor, per bank
- What the limit includes
- Both principal and interest earned
- Accounts combined
- Savings accounts and fixed deposits at the same bank are generally clubbed together
- Multiple branches
- Deposits at different branches of the same bank are combined
- Separate bank coverage
- The ₹5 lakh limit applies separately to deposits held with each bank
- Possible exceptions
- Certain joint accounts and deposits held under different legal arrangements may be insured separately