DICGC Cover for Meera's Deposits and Joint Account
Meera holds three deposits in her own name at a single commercial bank: a savings account with ₹1.2 lakh, a fixed deposit of ₹3.5 lakh, and a recurring deposit with a maturity value of ₹1.1 lakh. She has validly nominated her son for the fixed deposit. Meera also holds a joint savings account with her husband, with a balance of ₹8 lakh; the account is operated jointly, and the mandate does not specify unequal shares. Her husband separately holds a fixed deposit of ₹6 lakh in his own name at the same bank. The bank fails and is placed under liquidation. Meera's neighbour tells her that each deposit is separately insured, so she will recover the full ₹5.8 lakh from her own deposits, and that the joint account is fully insured because it is a separate account. Meera asks the branch's former officer to verify this advice. Assume DICGC cover applies and ignore any set-off or loan adjustments.
1. Calculate Meera's total deposit exposure across all accounts and the amount of DICGC insurance cover available to her. Explain the basis.
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DICGC insurance is ₹5 lakh per depositor per bank, inclusive of principal and interest, and it aggregates deposits across all branches of the same bank. It is not applied separately to each account or each product.
Meera's own deposits: 1.2 + 3.5 + 1.1 = ₹5.8 lakh. Her equal share in the joint account: 8 / 2 = ₹4 lakh. Total exposure for the ceiling: 5.8 + 4 = ₹9.8 lakh.
Insurance cover = minimum of ₹9.8 lakh and ₹5 lakh = ₹5 lakh. Uninsured amount = 9.8 − 5 = ₹4.8 lakh.
The neighbour's statement that each deposit is separately insured is wrong. Meera cannot recover ₹5.8 lakh merely because she has three accounts; the ceiling operates per depositor per bank.
2. How is the ₹8 lakh joint account treated for DICGC purposes, and what is the insured position for Meera and her husband?
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In a joint account, each joint holder is treated as a separate depositor for the DICGC ceiling. Because the mandate does not specify unequal shares, take equal beneficial shares: ₹4 lakh each.
- Meera: ₹4 lakh from the joint account is added to her ₹5.8 lakh of own deposits, giving ₹9.8 lakh. Her cover is capped at ₹5 lakh; she has no separate additional ₹5 lakh cover for the joint account.
- Husband: ₹4 lakh from the joint account is added to his ₹6 lakh fixed deposit, giving ₹10 lakh. His cover is capped at ₹5 lakh.
Thus the joint account is not 'fully insured' as a separate ₹8 lakh account. The combined insurance protection for the two holders is ₹5 lakh + ₹5 lakh = ₹10 lakh, but because each already has other deposits, the joint balance is effectively absorbed within their individual ceilings. The remaining balances are uninsured claims in liquidation.
3. Does the nomination for the fixed deposit increase Meera's insurance cover or change the beneficiary? Explain.
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No, it does not increase the cover. The fixed deposit remains one of Meera's deposits and is counted within her ₹5 lakh aggregate ceiling. A nomination does not create a separate insured deposit or a separate depositor.
A nomination directs the bank to pay the deposit proceeds to the nominee after the depositor's death. The nominee generally receives the money as a trustee for the legal heirs rather than as an absolute owner, unless the nomination or applicable law provides otherwise. For DICGC purposes, the insured amount is paid in respect of Meera's deposit; the nomination affects who receives the proceeds, not how much is insured. Meera's son cannot claim an extra ₹5 lakh cover because he is the nominee.