More than a dozen co-operative banks go belly up. Should you worry?

As many as 13 cooperative banks failed in 2012-13, said a report published in The Economic Times today.

Nine are from Maharashtra, two from Gujarat and one from Andhra Pradesh and Odisha. These banks could not repay the deposits which their customers had kept with them.

What you need to know: As a depositor you don’t really need to be worried about your bank going belly up, well almost. Reason being, the deposits which you make with your bank come with some sort of a safety net. This safety net, in banking parlance is an insurance provided on your deposits by Deposit Insurance and Credit Guarantee Corporation (DICGC). This corporation comes under the wings of the Reserve Bank of India (RBI) and as its name suggest, offers an insurance cover on the deposits you make and also guarantee credit. All commercial banks are covered by DICGC. All foreign banks which are currently functioning in India, as well as co-operative banks and rural regional banks are also covered.

[caption id=“attachment_821375” align=“alignleft” width=“380”] If you hold Rs 2 lakh, you will still get only Rs1 lakh, in case your bank goes belly up. Reuters[/caption]

What’s the amount: You get this cover for your funds in the savings account, as well as current accounts. Fixed Deposits and recurring deposits also enjoy this cover. Your deposits are insured up to a maximum of Rs 1 lakh. So, if you hold a deposit of Rs 20,000 you will only get Rs 20,000. Keep in mind, that this Rs 1 lakh amount includes both the principal as well as interest amount.

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So, if you hold Rs 97,000 as principal and Rs 2,000 as interest, you will be able to recover Rs 99,000 and not Rs 1 lakh. But, if you hold Rs 2 lakh, you will still get only Rs1 lakh, in case your bank goes belly up

You can read more about What to do if your bank goes belly up here

The good part is that Reserve Bank’s credit insurance arm has paid Rs 159.85 crore to depositors of 13 cooperative banks which went bankrupt during April 2012 to March 2013, according to DICGC.