₹5 lakh deposit insurance: how to split ₹12 lakh of FDs

A cap that interest quietly eats

Deposit insurance in India, run by the Deposit Insurance and Credit Guarantee Corporation (DICGC), covers up to ₹5 lakh per depositor per bank as of November 2026. Confirm the figure on the DICGC website before you act on any number here, because the limit is set by law and can be revised.

Two features of the rule matter more than the headline. First, it is per bank: every account you hold at one bank, in the same capacity and across all branches, shares one ₹5 lakh limit. Second, it covers principal and interest together. A ₹5 lakh deposit that has earned interest is already over the limit.

That second point is what changes the arithmetic. This post works out how much you can put in one bank so the deposit stays under ₹5 lakh as it grows, and how many banks that takes for ₹12 lakh.

How much one bank can hold

Assume an FD rate of 7% a year, compounded quarterly. That is an illustration, not a quote for any bank. Quarterly compounding means ₹1 grows by a factor of 1.0175 each quarter. Divide ₹5 lakh by the growth factor to find the largest principal that still ends under the limit:

A ₹5 lakh FD, the number most people assume is fully safe, starts slipping over the limit as soon as the first interest accrues. By the end of five years the same deposit would stand at about ₹7.07 lakh, and ₹2.07 lakh of it would sit above the cover.

Note what the insured amount actually is. If a bank failed in year 3, the cover would be calculated on principal plus interest accrued to that date, not on the maturity value. The table is the conservative version: it keeps the deposit under the limit at maturity, so it is under the limit at every earlier point too.

Splitting ₹12 lakh

The pattern: the longer the tenure, the more banks you need to stay under the cap. A 1-year FD fits ₹12 lakh into three banks. A 5-year FD at the same rate needs four.

The ₹4 lakh, 3-year row is close. At ₹4.93 lakh the margin is thin, and a slightly higher rate would breach it. If you keep a savings account at the same bank, that balance counts too, since the limit is on your total deposits there.

What this does not cover

• A bank's failure is not the only way to lose out. Insurance protects the deposit up to the limit; it does not pay the moment a bank is in trouble, and the claim process takes time.
• Not every deposit is a bank deposit. Corporate FDs, NBFC deposits and mutual fund units are outside this scheme.
• More banks means more admin. Each bank has its own KYC, nominee, TDS paperwork and interest statements. The FD ladder guide covers how to stagger maturities across several banks.
• Higher rates and lower safety sometimes travel together. A bank paying notably more than its peers is a reason to look at why. Spreading across banks limits the damage of one failure but does not remove the need to look.

The joint-account question

Deposits in different capacities are insured separately: for example, in your own name, in a joint name with a spouse, or as a guardian for a minor. A couple can therefore hold more at one bank under separate capacities than either could alone. How the bank has recorded each account decides which capacity applies, so check the account's holding pattern and the DICGC's current rules for the exact classification.

A short checklist

1. Add up every deposit you hold at each bank, including savings balances.
2. Add the interest you expect to accrue by the end of the tenure.
3. Compare each bank's total with the current limit.
4. If a bank is over, move new money to another bank rather than adding to the first one.

You can work out how an FD grows with the FD calculator. The numbers above use a flat 7% for illustration; plug in your own rate and tenure before splitting anything.

Figures here are worked examples at an assumed 7% rate and are not offers or forecasts. This is not individual advice.