Investments in the Bank are safe.
Deposit Insurance and Credit Guarantee Corporation (DICGC) makes sure that your deposits are safe with the bank up to a certain amount (Rs. 5 lakh).
Union Finance Minister Nirmala Sitharaman in her budget speech 2020 has proposed to hike the bank deposit insurance in scheduled commercial banks to Rs 5 lakh per depositor from the current Rs 1 lakh
All banks pay a premium, which is equal to 0.10% of total deposits, to DICGC. In case of a bank default, registrars appoint a 'liquidator' who represents all creditors to DICGC. It submits a list of depositors (whose KYC is done) to DICGC. After receiving the insured amount, liquidator distributes the amount to depositors.
Rs. 5 lakh, the maximum insurance amount, cover a/c balance, principal and interest amount put together. If you have different deposits with the same bank but in different branches, then all will be clubbed together and gets combined cover of Rs. 5 lakh only. But if you have made deposits with different holding patterns (A, A + B, B + A etc.) or in different capacities (individual, partner of a company, director of a company or trustee) then each will get Rs. 1 lakh insurance cover separately. But an individual and him being the sole proprietor of a proprietorship company will not get separate cover.
DICGC is a wholly-owned subsidiary of RBI and in case of inadequacy, it can even borrow from RBI.
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