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    Your deposits with Yes Bank could be insured for more than Rs 5 lakh: Here's why

    Synopsis

    How much of an investor's deposits with the bank are insured depends on how the deposits are held i.e. single deposit vs multiple deposits and the ownership pattern of the deposits. Insurance of bank deposits under DICGC rules depends on the ownership of deposits.

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    Account holders should know that deposits with Yes Bank are insured for up to Rs 5 lakh by the DICGC.
    Customers of Yes Bank are a worried lot, and understandably so. Many companies have salary accounts of employees with the bank, many have savings accounts due to the bank's higher interest rates (6 per cent per annum) and there are fixed deposit and recurring deposit holders too. How much of an investor's deposits with the bank are insured depends on how the deposits are held i.e. single deposit vs multiple deposits and the ownership pattern of the deposits.

    The good news is that depending on this, a person's deposits could be effectively insured for more than Rs 5 lakh. Insurance of bank deposits under the Deposit Insurance and Credit Guarantee Corporation (DICGC) rules depends on the ownership of deposits.

    Account holders should know that deposits with Yes Bank are insured for up to Rs 5 lakh by the DICGC. DICGC insures all deposits such as savings, fixed, current, recurring, etc. except for a few such as inter-bank deposits, any amount due on account of and deposit received outside India, etc.

    Here is a look at how DICGC insurance of deposits depends on mode of ownership of the deposit.

    For instance, let us say Mr A has an individual salary account and fixed deposit in his name only with Yes Bank. Then both the accounts (i.e., salary account and fixed deposit) will be clubbed together and deposits will be insured for maximum of Rs 5 lakh.

    Along with this, Mr A has deposits held jointly with his mother where he is a first account holder and his mother is the second holder. This account will be treated as a separate account from those accounts where he is sole owner e.g. his individual salary and fixed deposit account. The deposits in the joint account and his individual accounts will be insured separately under the DICGC rules for a maximum of Rs 5 lakh.

    Let us assume, Mr A has a third savings account, again jointly held with his mother, where his mother is the first holder and Mr A is the second account holder. Then in such a scenario, this account will also be treated as a separate entity, i.e., it will be insured separately under DICGC rules.

    deposit-coverageET Online
    *Deposits held with a bank are insured for maximum of Rs 5 lakh which is inclusive of savings account, fixed deposits and other deposits covered under the DICGC rules held in the same capacity and same right. Source: ET Online; RBI website, DICGC rules.

    From the table above it can be seen that since Mr A's salary account and his FD is operated solely by him, they will be clubbed together and will be fully covered up to a maximum of Rs 5 lakh. In this case the total is Rs 2,75,000 which is fully insured as it is below Rs 5 lakh.

    Further, both the joint accounts held by Mr A and his mother will be treated separately. This is because the order in which these accounts are held is different. In the point 3 in table above, the account is jointly held by Mr A and his mother where Mr A is the first account holder and his mother is the second account holder. Here, the accounts will be insured for a maximum of Rs 5 lakh even though the total deposits held in the savings account and fixed deposits exceed Rs 5 lakh.

    Remember the DICGC insures principal and interest up to a maximum amount of Rs. five lakh. If the principal is Rs 5 lakh, then interest will not be covered.

    In point 4 in the table above, the joint account is held in a way where Mr A's mother is the first account holder and Mr A is the second account holder. Here the total insurance coverage on the deposit is Rs 5 lakh.

    Thus Mr A's money with the bank is insured up to Rs 7.75 lakh (sum of 1, 2, and 3 in table above) even though he is the first holder in all these accounts.

    The deposit at 4 in the table is considered as owned by Mr A's mother because she is first holder. Therefore, this deposit will separately be insured up to Rs 5 lakh.


    ( Originally published on Mar 09, 2020 )

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