• MyLove @M
• 30 Dec, 2024

If a bank shuts down unexpectedly, recovering your hard earned money from the bank it can be a stressful process. However, as per the rules of the Deposit Insurance and Credit Guarantee Corporation (DICGC), there is a structured way to ensure you to get your money back. Here is everything you need to know about the process in simple terms.

What Happens When a Bank Closes.?

Every Banks store deposits from their customers with the promise of safety and returns. However, in rare cases financial instability or operational challenges may be force a bank to shut down. When this happens customers often worry about losing their money.

But don’t be panic.! If the Reserve Bank of India (RBI) decides to close a bank, some steps are taken to ensure that depositors are compensated for their losses.

How Does the Process Work.?

The money recovery process is guided by the “DICGC” Act, 1961. Here is a step by step breakdown,

1. Deposit Insurance Coverage

Every depositor’s account is insured up to Rs. 5 lakh including both principal and interest.

This means even if you have deposited more than Rs. 5 lakh, you will only be eligible to claim Rs. 5 lakh under insurance coverage.

2. Steps to Claim Your Money

Once a bank announces its closure, visit your branch as soon as possible.

Submit the required documents for your claim. Bank officials will guide you on the exact paperwork needed.

3. For Amounts Exceeding ₹5 Lakh

If your deposits more than Rs. 5 lakh, the remaining amount falls under the “Liquidation Process.”

This process distributes the remaining funds after settling the bank's liabilities.

Key Points to Remember

Insurance Coverage Limit: Regardless of the total deposit amount, the maximum compensation under DICGC is Rs. 5 lakh.

Mandatory Documentation: Ensure all your documents, such as ID proofs and account details are ready for submission.

Liquidation Process: For amounts beyond Rs. 5 lakh, participation in the liquidation process is essential.

Tips: Always diversify your savings across multiple banks and investment instruments to minimise risk.