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5 lacs as bank account insurance? – increase it to 20 lacs!

by | Jul 17, 2020 | Banking, Basics, Finance

Everybody who has a bank account knows that it is insured for Rs. 5 lacs by the Deposit Insurance and Credit Guarantee cover.

This cover is applicable to all commercial banks, including branches of foreign banks functioning in India, local area banks and regional rural banks.

One would expect that as soon as you open an account, the bank would give you a note explaining how the insurance works. But nobody ever tells you how this is calculated. Here’s how.

How is the ‘Ownership’ determined?

‘Ownership’ is determined by the names on the account and also the sequence of these names. Say Suresh and Ranjana are husband and wife. They can have accounts in a bank with sequence of names like these:

  1. Suresh only and Ranjana as nominee.
  2. Suresh first and Ranjana as second name.
  3. Ranjana only and Suresh as nominee.
  4. Ranjana first and Suresh as second.

Each of the ‘ownership’ mode is covered for 5 lacs. So, in total, their bank assets would be covered for 20 lacs!

How is the ‘Amount’ calculated?

Now, for the bad news – as far as the ownership ‘mode’ is concerned, it covers all ‘relationships’ with the bank. This means it covers savings accounts, current accounts, FDs, Recurring deposits, etc – across all branches of the same bank. So if you have money in savings accounts and FDs in different branches of the bank, under the same sequence of names, all of them will be insured for a total of 5 lacs only!

When is the money paid out?

The insurance money is paid out around 2 months after the bank is liquidated. The PMC bank has not been liquidated even after so many months after the problems it had. In short, the RBI will take its own sweet time to calculate the amount payable to each ‘owner’ and also to liquidate the bank.


So, what to do? Choose two banks and divide your money between these two – with the stronger one getting most of the funds, with multiple accounts in each. Consider debt mutual funds – long term ones should give 6.5 to 7% returns and they are more tax efficient than bank FDs.

Take care and be safe. 

Niranjan Bangera




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  • This is the source from where I got the above information from



  1. Auldius P. B. Pais

    It is a good idea to have accounts in different sequence of names of spouses to get the benefit of bank deposit insurance. But what happens in the future when the relationship between the husband & wife deteriorates? My batch mate at DMET is having trouble. His marriage broke down for some reasons, which I am not aware of, after 30 ~ 32 years of married life. During the sailing days, he bought a house in his wife’s name by gifting the money to his wife’s account for ease of convenience & tax purposes. Later while working as a superintendent in London he bought a house in joint names again by transferring money to her account for tax purposes. Now the wife is fighting with him for possession of both the houses. Can the gifted part of the house be reversed?

    • niranjan

      Auldius, when one is married, one cannot plan investments with a premise that there may be a divorce!! These are exceptional circumstances. I’m sure they can sit and sort things out or a judge will sort out for them! Also, you know only one part of the story.

  2. barun

    Idea of keeping 4 accounts in each bank looks great. But remember each person has only ONE customer ID // CIF//, so 1st name account has one CIF i.e for account of 1. Suresh only and Ranjana as nominee 2. Suresh first and Ranjana as second name will have same CIF so they are not treated as 2 diffrent a/c but as one therefore max you get 10lac not 20 lac. Ground Zero reality.
    One CIF has one KYC docs got it. IAS and Managers are more clever in playing with words then us,

    • niranjan

      Sir, you are wrong. Go to your bank and ask them to clarify. Also go to RBI website and check out the FAQs there.


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Written By: niranjan

Financially Stupid Niranjan


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