Will your money be safe in banks?
Currently, if you deposit money in banks across the country, your amount up to Rs 5 lakh remains safe because you get insurance cover on this amount. Now, if your bank goes bankrupt or closes due to some problem, you will get back the amount deposited in your bank account up to Rs 5 lakh. Currently, this deposit insurance facility is available free of cost in banks. But now charging a risk-based premium is being considered.
Reserve Bank of India (RBI) Deputy Governor Swaminathan J on Wednesday said that a risk-linked premium system for deposit insurance can be considered. This will ensure higher contribution to the fund while also insuring high-risk institutions (banks).
What will be the risk-related premium?
The risk-related premium that Deputy Governor Swaminathan J. is talking about. What it simply means is that a small premium can be charged and at the same time insure the customers of banks whose risk of collapse is high. This will depend on their risk level. However, it is not yet clear whether the burden will fall on the customers when this premium is charged.
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Currently, deposit protection in the country is provided by the ‘Deposit Insurance and Credit Guarantee Corporation’ (DICGC). It operates under the rules of the Reserve Bank of India. DICGC recently organised the International Conference of the Asia Pacific Region of the International Union of Deposit Insurers. At the same conference, Deputy Governor Swaminathan J spoke about the consideration of risk-related premiums.
The job of regulators is getting tough
At the conference, Swaminathan said that as the financial sector becomes more digital, the monitoring system of deposit insurers needs to be strengthened. To do this, regulators and observers need to work together. This includes new risks related to digital payments, cybersecurity and fintech.
