Saving a Down Payment in Bengaluru: Deposit Insurance, the Rs 5 Lakh Limit and Joint Accounts

A couple in Bengaluru have spent three years building a down payment for their first flat. The fund now stands at Rs 24 lakh, parked in fixed deposits at one bank because the rate looked good. On 30 July 2025, a cooperative bank in Mandya, Karnataka, was placed under all-inclusive directions by the Reserve Bank of India, and its depositors had to file claims to get their money back. It is a reminder worth absorbing before the booking cheque is written: the money you are saving for a home is protected only up to a limit, and how you hold it decides how much of it is covered.

The rules come from the Deposit Insurance and Credit Guarantee Corporation. Its FAQs for depositors and its 31 July 2025 press release on the Mandya bank set out what is covered and how claims are paid. This guide reads them for a buyer saving towards a home. It is buyer guidance, not investment advice, and it does not rate or recommend any bank.

The short answer. DICGC's FAQs say each depositor in a bank is insured up to a maximum of Rs 5 lakh, covering principal and interest, for deposits held in the same right and same capacity. Deposits in different branches of the same bank are added together, while deposits in different banks are insured separately. Accounts held in a different capacity, such as a joint account with names in a different order, get separate cover up to Rs 5 lakh. The trade-off: spreading a down payment across banks or account structures widens the insured amount, but it means more accounts to manage and track while you are also handling a home purchase.

How much of my saved down payment is insured?

Up to Rs 5 lakh per depositor per bank, in the same right and capacity. The FAQ says each depositor in a bank is insured up to a maximum of Rs 5,00,000 for both principal and interest held in the same right and same capacity, as on the date of liquidation, cancellation of the bank's licence, the coming into force of an amalgamation, merger or reconstruction scheme, or the imposition of all-inclusive directions by RBI with restrictions on withdrawal.

The FAQ gives a worked example on interest. If an account had principal of Rs 4,95,000 plus accrued interest of Rs 4,000, the insured amount would be Rs 4,99,000. If the principal was already Rs 5 lakh, the accrued interest would not be insured, because that would exceed the limit. In the opening example, Rs 24 lakh in one name at one bank would leave Rs 19 lakh above the insured limit.

Does it help to open several FDs at the same bank?

No. The FAQ says all funds held in the same type of ownership at the same bank are added together before deposit insurance is determined. It also says deposits kept in different branches of a bank are aggregated, and a maximum of up to Rs 5 lakh is paid. A savings account, two fixed deposits and a recurring deposit in the same name at the same bank count as one pool.

Different banks are a different matter. The FAQ says that if you have deposits with more than one bank, the coverage limit applies separately to the deposits in each bank, and that funds at two banks closed on the same day are still insured separately.

How are joint accounts treated?

By the names and their order. The FAQ, revised with effect from 26 April 2007, says that if more than one deposit account is jointly held by individuals A, B and C with their names in the same order, all those accounts are treated as held in the same capacity and right and are aggregated within the Rs 5 lakh limit. If the names are in a different order, such as A, B and C in one account and C, B and A in another, or if the group of persons differs, the accounts are treated as held in different capacity and right, and cover is available separately up to Rs 5 lakh for each.

The FAQ's own example uses a husband and wife. An individual's own savings and fixed deposits are one pool. Accounts the same person holds as a partner of a firm, guardian of a minor, director of a company, trustee of a trust, or jointly with a spouse are treated as held in a different capacity and enjoy separate cover up to Rs 5 lakh.

Which banks are covered?

Most, but not every lender that takes deposits. The FAQ says all commercial banks, including branches of foreign banks in India, local area banks and regional rural banks, are insured. It says all cooperative banks are currently covered, and that primary cooperative societies are not insured by DICGC. It also says the scheme is compulsory and no insured bank can withdraw from it.

The FAQ says DICGC insures savings, fixed, current and recurring deposits, with listed exceptions such as deposits of foreign governments, Central and State governments, inter-bank deposits, and amounts due on deposits received outside India. If you are unsure whether your bank is insured, the FAQ says to ask the branch.

What happens if my bank is placed under RBI directions?

A claim process starts. For banks under all-inclusive directions, the FAQ says that under Section 18A of the DICGC Act, 1961, the bank must furnish the list of depositors within 45 days of the directions, DICGC verifies the claims within 30 days of receipt and pays depositors within 15 days after verification, with the total time from the directions to payment not exceeding 90 days.

The Mandya case shows the timeline in practice. The press release says Lokapavani Mahila Sahakari Bank Niyamitha, Mandya, was placed under all-inclusive directions with effect from 30 July 2025, that claims and willingness declarations were due by 13 September 2025, and that payment by DICGC was scheduled for 28 October 2025. Depositors had to submit identity documents, a written willingness declaration and alternate bank account details, with payment up to Rs 5 lakh in the same capacity and same right.

The FAQ also says banks can set off dues the depositor owes them, so insurance is available after netting such dues. If you have a loan from the same bank, keep that in mind.

What if the bank is liquidated or merged instead?

The FAQ describes separate routes. If a bank goes into liquidation, DICGC is liable to pay the liquidator the claim amount of each depositor up to Rs 5 lakh within two months from receiving the claim list from the liquidator, and the liquidator then pays each insured depositor. The FAQ says DICGC does not deal directly with depositors of liquidated banks; the liquidator prepares the depositor-wise claim list. If a bank is reconstructed, amalgamated or merged, DICGC pays the bank concerned the difference between the full deposit or the insurance limit, whichever is less, and the amount the depositor received under the scheme, within two months of receiving the claim list.

The FAQ also explains what happens if a bank stops paying for cover. DICGC may cancel an insured bank's registration if it fails to pay the premium for three consecutive periods, and the public is notified through newspapers. In the event of cancellation, deposits remain covered by the insurance till the date of cancellation.

How should a buyer hold a down payment while house hunting?

Plan the holding as carefully as the amount. Work out how much you will need and when, from the booking amount to the balance at registration. Check how much sits in each bank in each name, against the Rs 5 lakh limit in the same right and capacity. If you are holding more than that, the FAQ's rules on different banks and different capacities show where separate cover applies. Our guides on choosing a down payment level and on the booking amount and agreement for sale cover how much you will need at each stage.

A seven-point checklist for a down payment fund

1. Add up all balances in one name at each bank, across branches and deposit types.
2. Compare each bank's total with the Rs 5 lakh limit for the same right and capacity.
3. Note that interest counts towards the limit along with principal.
4. Check how joint accounts are named, since name order affects capacity.
5. Confirm your bank is insured by DICGC; ask the branch if unsure.
6. Remember that primary cooperative societies are not insured by DICGC.
7. Keep the funds you will need for the booking amount and registration easy to access.

Frequently asked questions

How much of my bank deposit is insured in India?

DICGC's FAQs say each depositor in a bank is insured up to a maximum of Rs 5 lakh for principal and interest held in the same right and same capacity. Deposits in different branches of the same bank are aggregated, while deposits in different banks are insured separately.

Are joint accounts insured separately from my own account?

The FAQ says accounts held in a different capacity, such as jointly with a spouse, get separate cover up to Rs 5 lakh. Joint accounts with the same names in the same order are aggregated, but joint accounts with names in a different order, or different holders, are insured separately.

Are cooperative bank deposits insured by DICGC?

The FAQ says all cooperative banks are currently covered under the deposit insurance scheme, including State, Central and primary urban cooperative banks. It says primary cooperative societies are not insured by DICGC, so check what kind of institution holds your money.

How long does DICGC take to pay if a bank is under RBI directions?

Under Section 18A of the DICGC Act, the FAQ says the bank must submit the depositor list within 45 days, DICGC verifies within 30 days and pays within 15 days after that, with the total time from the directions to payment not exceeding 90 days.

Last updated 2026-11-05. PropNewz Team.