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The Shrinking Safety Net: Less than Half of Bank Deposits are Now Fully Insured
The Insured Deposits Ratio (IDR) has fallen to a five year low of 41.5%, meaning less than half of bank deposits are fully covered by the insurance limit of ₹5 lakh. This decline is happening because the total value of deposits is growing much faster than the amount of deposits protected under the scheme.
Author: Nimmydev
Published: 4 hours ago
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A recent report has brought to light a significant worry for savers: the Insured Deposits Ratio (IDR) in Indian banks has fallen to a five year low of 41.5% in the financial year 2025 (FY25*). This means that less than half of the money sitting in accessible bank accounts is fully protected by deposit insurance; Financial Express reported.
The Core Numbers
The figures, as of March 2025, show a stark contrast:
Total Assessable Deposits: 240.96 lakh crore (an increase of 10.3% year on year).
Total Insured Deposits: 100.05 lakh crore (a slower growth of 6.3% year on year).
In simple terms, for every 240.9 lakh crore held in bank deposits that are eligible for insurance, only about 100.5 lakh crore is covered. This gap causes the IDR to drop to 41.5%.
What Caused the Drop?
The main reason for the declining ratio is that the total value of deposits is growing faster than the amount of deposits that are insured.
The Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the Reserve Bank of India, insures each bank depositor up to a limit of 5 lakh for both the principal and accrued interest across all their accounts (savings, fixed, current, and recurring) in a single bank.
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A key factor influencing the ratio's history is the insurance limit itself:
The coverage limit was significantly raised from 1 lakh to 5 lakh in February 2020.
Following this change, the IDR briefly jumped to 51% in September 2020, but it has been steadily falling ever since.
As a banker noted, the huge gap in deposit insurance exists because many large deposits particularly those held by corporations and wealthy individuals significantly exceed the 5 lakh coverage limit.
Public Sector Banks Fare Better
When looking at different bank groups, a distinct difference emerges:
Public Sector Banks (PSBs): These banks have a better IDR of 47.2% for their 126 lakh crore of assessable deposits.
Private Banks: These institutions lag behind with a lower IDR of 31.4% on 81.89 lakh crore of assessable deposits.
The DICGC stated that the ratio has been declining from about 50.9% in 2020, which suggests that assessable deposits are increasing at a faster pace than insured deposits. They also added that globally, coverage ratios tend to stabilise at around 48% after a few years.
What Does This Mean for the Average Saver?
For the majority of everyday savers, the 5 lakh guarantee per person, per bank is sufficient and offers a robust safety net.
However, the declining IDR highlights a growing risk for those with very large sums in a single bank. It underscores the importance of not exceeding the 5 lakh limit in any one bank if a depositor wants 100% of their funds to be fully insured. The overall trend signals that the system's capacity to cover all deposits is being stretched as the economy and its large-scale savings grow.
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