Bank Collapsed? Here’s How Much Money You Can Recover!

Imagine waking up to find your bank has collapsed, and your money is locked away. Sounds terrifying, right? This nightmare became a reality for New India Co-operative Bank customers after the RBI barred the bank from lending, borrowing, or processing transactions due to financial fraud. But if your bank fails, do you lose all your money? Not quite!

Your Money Is Safe – Up to ₹5 Lakh!

According to RBI, deposits up to ₹5 lakh per depositor are insured. This means that even if your bank collapses, you can recover up to this limit.

Previously, depositors had to wait until a bank was completely liquidated before claiming their insured amount—a process that could take years. However, the 2021 amendment to the DICGC Act changed this, allowing depositors to access their insured funds even if the bank is under a moratorium.

What Happened to New India Co-operative Bank Depositors?

The RBI imposed strict restrictions on the bank, including a complete freeze on withdrawals due to its deteriorating liquidity position. On February 13, 2025, the RBI announced:

"Considering the bank’s present liquidity position, the bank has been directed not to allow withdrawal of any amount from savings bank or current accounts or any other account of a depositor but is allowed to set off loans against deposits, subject to the conditions stated in the RBI Directions."

With the RBI’s action, depositors must now express their intent to claim their insured amount. The DICGC will verify the claims, and within 90 days, the insured amount will be transferred.

How to Recover Your Deposits If Your Bank Fails?

1. Confirm Your Bank’s DICGC Coverage Most commercial and cooperative banks in India are covered, but it’s always best to verify.

2. Submit Your Claim Immediately Once a bank is placed under moratorium, claim your insured funds as soon as possible.

3. Track Your Claim Online with Daava Soochak To ensure transparency, DICGC introduced “Daava Soochak” in 2024, an online tool for tracking insurance claims in real time.

4. Diversify Your Deposits Only ₹5 lakh per bank is insured. If you have more money, spread it across multiple insured banks to safeguard your savings.