Deposit Insurance After a Bank Failure
A district cooperative bank customer, Meera, holds the following deposits in her own name at the same bank: savings account ₹1.80 lakh, fixed deposit ₹3.40 lakh, recurring deposit ₹0.90 lakh, and a special fixed deposit ₹1.20 lakh. She also has a joint savings account with her husband, Ravi, with a balance of ₹2.00 lakh; the bank’s records show equal shares. The bank is placed under liquidation and deposit insurance is invoked. Meera wants to know how much of her money is protected. All accounts are in the same bank, and no deposit is held by Meera in a different capacity such as trustee. The insurance limit is ₹5 lakh per depositor per bank. The officer must aggregate Meera’s own deposits, treat the joint account correctly, and explain the uninsured amount. Assume no interest is payable after liquidation and ignore any set-off.
1. Calculate Meera’s total deposit exposure, her insured amount, and her uninsured amount. Show the treatment of the joint account.
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Meera’s sole deposits: ₹1.80 lakh + ₹3.40 lakh + ₹0.90 lakh + ₹1.20 lakh = ₹7.30 lakh.
Joint account treatment: the ₹2.00 lakh joint balance is shared equally, so Meera’s share is ₹1.00 lakh. Ravi’s share is also ₹1.00 lakh and is insured separately in his name.
Meera’s aggregate insurable deposits in the same bank = ₹7.30 lakh + ₹1.00 lakh = ₹8.30 lakh.
Insurance limit = ₹5.00 lakh per depositor per bank. Insured amount = ₹5.00 lakh. Uninsured amount = ₹8.30 lakh − ₹5.00 lakh = ₹3.30 lakh.
So Meera is protected up to ₹5 lakh and stands uninsured for ₹3.30 lakh, ignoring any liquidation recovery.
2. If the ₹3.40 lakh fixed deposit had been in Ravi’s sole name instead of Meera’s, what would Meera’s insured and uninsured amounts be? Would Ravi be fully covered?
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Meera’s sole deposits would then be ₹1.80 lakh + ₹0.90 lakh + ₹1.20 lakh = ₹3.90 lakh. Adding her ₹1.00 lakh share of the joint account gives ₹4.90 lakh. This is below the ₹5 lakh limit, so Meera would be fully insured: insured ₹4.90 lakh, uninsured ₹0.
Ravi would hold ₹3.40 lakh in his sole name plus his ₹1.00 lakh joint share = ₹4.40 lakh. That is also below ₹5 lakh, so Ravi would be fully covered. The household’s total deposits have not changed, but the insurance outcome improves because the ₹5 lakh limit applies separately to each depositor.
3. Meera asks whether splitting her ₹7.30 lakh of sole deposits equally across two branches of the same bank would raise her cover. Answer.
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No. Deposit insurance is applied per depositor per bank, not per branch. If Meera keeps the deposits in the same bank, the balances in both branches are aggregated for her depositor limit. Splitting ₹7.30 lakh into, say, ₹3.65 lakh at each branch still gives total deposits above ₹5 lakh, so her insured amount remains ₹5 lakh and the uninsured amount remains ₹2.30 lakh on the sole deposits alone. The position would change only if the deposits were placed in a different bank, because the limit would then be applied separately to that bank.