Millions of bank customers may soon get extra protection for their savings. The central government is reportedly considering increasing the bank deposit insurance limit from the current ₹5 lakh to ₹7.5 lakh.
According to reports, the Finance Ministry has already sent a proposal to the Prime Minister’s Office (PMO), and a final decision could be announced soon.
If approved, bank customers will have better financial security in case a bank faces serious problems.
What Is Deposit Insurance?
In India, bank deposits 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 banking license, DICGC compensates depositors up to the insured amount.
At present, deposits up to ₹5 lakh per customer per bank are covered under this insurance scheme. This limit includes both the deposited amount and the interest earned.
The insurance cover applies to savings accounts, current accounts, fixed deposits (FDs), and recurring deposits (RDs).
Insurance Cover May Increase After Six Years
The last major increase in deposit insurance happened in February 2020, when the government raised the limit from ₹1 lakh to ₹5 lakh.
The move came after concerns over the financial health of some cooperative banks and the crisis faced by Yes Bank.
Now, the government is considering another increase, which could take the insurance cover to ₹7.5 lakh. If approved, this would be the first hike in the limit since 2020.
Why Is the Government Considering This Move?
Officials believe that protecting depositors is important for maintaining trust in the banking system.
In recent years, several cooperative banks have faced regulatory action, leading DICGC to settle claims for affected customers.
A higher insurance limit would provide an additional ₹2.5 lakh of protection if a bank fails.
This could be especially beneficial for senior citizens, fixed deposit investors, and middle-class families who keep larger savings in banks.
New Risk-Based Premium System for Banks
The government is also planning changes in the way banks pay for deposit insurance.
Currently, all banks pay the same premium rate. Under the proposed system, banks with strong financial health and better risk management may pay lower premiums.
On the other hand, banks with weaker financial positions or higher risk levels could be charged more.
This approach is expected to encourage banks to improve their financial stability and better safeguard customer deposits.
DICGC Fund Crosses ₹2.61 Lakh Crore
DICGC has built a strong financial reserve to protect depositors.
As of March 31, 2026, the deposit insurance fund had crossed ₹2.61 lakh crore.
During the financial year 2025-26, DICGC settled claims worth ₹1,988 crore, showing that it has substantial resources available to support depositors when needed.
What It Means for Customers
If the proposal gets approval, bank customers will enjoy higher protection on their savings without having to take any additional steps.
The move could strengthen confidence in the banking system and provide greater peace of mind, especially for those who keep large amounts in savings accounts and fixed deposits.
