Millions of bank customers may soon get bigger protection for their savings. The Central Government is reportedly considering increasing the bank deposit insurance limit from ₹5 lakh to ₹7.5 lakh.
According to reports, the Finance Ministry has already sent the proposal to the Prime Minister’s Office (PMO), and a final decision could be taken soon.
If approved, bank customers will receive stronger protection for their money in case a bank faces financial trouble.
What Is Bank Deposit Insurance?
Bank deposits in India are protected by the Deposit Insurance and Credit Guarantee Corporation (DICGC), which is a wholly-owned subsidiary of the Reserve Bank of India (RBI).
If a bank shuts down or loses its license, DICGC compensates depositors up to a fixed limit. At present, deposits up to ₹5 lakh are insured in a single bank.
This coverage includes savings accounts, current accounts, fixed deposits (FDs), recurring deposits (RDs), along with the interest earned on them.
Insurance Limit May Rise After Six Years
The last major increase happened in February 2020 when the government raised the deposit insurance cover from ₹1 lakh to ₹5 lakh.
The decision was taken after concerns over the financial health of some cooperative banks and the crisis at Yes Bank. Now, the government is considering another increase, which could take the insurance cover to ₹7.5 lakh.
If approved, depositors will get an additional protection of ₹2.5 lakh compared to the current limit.
Why Is the Government Considering This Move?
Officials believe that protecting small and middle-class depositors is important for maintaining confidence in the banking system.
Over the past few years, several cooperative banks have faced regulatory action, forcing DICGC to settle claims for affected customers. A higher insurance limit would provide extra security to depositors if a bank fails.
Senior citizens, fixed deposit investors, and middle-class families are expected to benefit the most from this proposed change.
Banks May Pay Different Insurance Premiums
Another important change being discussed is a risk-based premium system.
Currently, banks pay deposit insurance premiums at a uniform rate. Under the new approach, financially stronger banks with better risk management may pay lower premiums.
On the other hand, banks with weaker financial health or higher risk exposure could be required to pay more.
This system is expected to encourage banks to improve their financial stability and protect customer deposits more effectively.
DICGC Has a Strong Financial Cushion
DICGC currently has a large fund available to protect depositors.
As of March 31, 2026, the corporation’s deposit insurance fund had crossed ₹2.61 lakh crore. During the financial year 2025-26, it settled claims worth ₹1,988 crore.
These figures indicate that DICGC has substantial financial resources to support depositors if banks face difficulties in the future.
