It all comes down to money. It is a harsh reality of life. You need money to take care of utility bills and afford luxuries. You need money to start and scale your dream business. When discussing means of earning money, professional activities is a good idea. Professional activities undoubtedly let you earn a handsome income, but it is not the only means. You can also earn through investments.
Fixed Deposits are a popular investment option you can count on for wealth creation. It is simple and secure. As FD is a standard investment option, it is offered by all banks and other financial institutes. You should consider investing with a bank offering the highest interest rate to reap maximum benefits from your investment.
What is Fixed Deposit Insurance?
FD is a secure option that earns you guaranteed interest returns. However, you should not consider them to be entirely risk-free. In adverse situations, the bank could default or fail. Here you find yourself in a financially vulnerable spot. An FD Insurance works much like any other Insurance Plan. It extends a significant financial cover if the bank defaults or fails. This makes you feel worry-free about your financial position.
Deposit Insurance and Credit Guarantee Corporation is a Reserve Bank of India subsidiary. It offers Insurance coverage of Rs. 5 lakh on your FD. It covers all Indian banks, including nationalised and private banks.
How does Fixed Deposit Insurance work?
The working of FD Insurance is simple. Let us take an example here:
Assume you hold an FD worth Rs. 3 lakh with Bank A at 5% for a tenure of five years. Your estimated returns are Rs. 84,611, while your total maturity value would be Rs. 3,84,611. Due to unavoidable circumstances, bank A declares bankruptcy. You need not worry about your money's security if you have FD Insurance. Your projected maturity value would be Rs. 3,84,611 within the Insurance coverage.
DICGC is liable to pay this claim amount within two months of receiving the claim list from Bank A.
What are the various rules laid down by DICGC?
Following is a mention of the different rules laid down by DICGC:
- DICGC offers Insurance coverage up to Rs. 5 lakh only. The Insurance does not cover the interest incurred if your principal investment amount exceeds Rs. 5 lakh.
- DICGC follows per depositor per bank rule. This means the Fixed Deposit Account you hold with different banks are insured separately.
- The Insurance covers all investors, individuals, Hindu Undivided Families, sole proprietors, partnerships, trusts, and other entities.
- DICGC only covers resident FDs. The Insurance cover does not apply to Non-Resident Indian FDs.
- The Insurance cover is effective from the date of deposit to the maturity date.
- The Insurance cover is unaffected by the bank's mergers or amalgamation, provided the new entity is registered with DICGC.
