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    Question

    Under Section 16(1) of the Deposit Insurance and Credit

    Guarantee Corporation Act, 1961, Mr. A maintains deposits with Bank X as follows: (i) Savings Account: ₹2,50,000; (ii) Fixed Deposit (FD): ₹3,00,000; (iii) Recurring Deposit (RD): ₹75,000; (iv) Current Account: ₹50,000. All accounts are held in Mr. A's own name (same capacity and same right) across different branches of Bank X. Bank X is ordered to wind up and placed in liquidation. Which of the following correctly determines Mr. A's insurance coverage under Section 16?
    A Mr. A is entitled to receive the full amount of ₹6,75,000 because DICGC covers all types of deposits (savings, fixed, current, and recurring) separately Correct Answer Incorrect Answer
    B Mr. A is entitled to receive ₹5,00,000 (the maximum insurance limit) because all his deposits in Bank X held in the same capacity and same right are aggregated together, regardless of account type or branch Correct Answer Incorrect Answer
    C Mr. A is entitled to receive ₹5,00,000 for the Fixed Deposit (highest single account) and proportional recovery from other accounts Correct Answer Incorrect Answer
    D Mr. A is entitled to ₹5,00,000 only if the deposits were held for a minimum period of 2 years; deposits held for shorter periods receive reduced coverage Correct Answer Incorrect Answer
    E Mr. A is entitled to receive only ₹2,50,000 because the Savings Account is the primary account and others are secondary deposits Correct Answer Incorrect Answer

    Solution

    Explanation: Section 16(1) of the DICGC Act, 1961 provides: "The Corporation shall be liable in respect of every insured bank to insure the depositors thereof in such manner and subject to such conditions and exceptions as may be provided by this Act...each depositor in an insured bank shall be insured in the manner specified for the full amount of his deposits or for a sum of five lakh rupees, whichever is less, held by him in the bank in the same capacity and in the same right at all branches of that bank taken together." The critical elements are: (i) aggregation across ALL branches; (ii) aggregation across ALL account types (savings, fixed, current, recurring) when held in the same capacity and right; (iii) maximum coverage of ₹5,00,000. In Mr. A's case: Total deposits = ₹6,75,000. Since all are in Mr. A's own name (same capacity and right), they aggregate to ₹6,75,000. Since this exceeds ₹5,00,000, Mr. A receives only ₹5,00,000. The account types and branch distribution are irrelevant to aggregation. Thus, option (B) correctly applies Section 16(1)

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