India 2nd only to US in number of banks covered under deposit insurance: RBI Dy Governor

Jaipur: India’s Deposit Insurance and Credit Guarantee Corporation (DICGC) has extended coverage to 1,997 banks comprising 140 commercial banks and 1,857 cooperative banks, which is the largest number of deposit-taking institutions covered by deposit insurance in the world, second only to the US, RBI Deputy Governor Michael Debabrata Patra said on Tuesday.

Addressing the global conference here of the International Association of Deposit Insurers (IADI) Asia Pacific Regional Committee, Patra said that DICGC has made interim payments to the tune of Rs 5,359 crore ($640 Million) to 3.77 lakh depositors as of March 31.

“Currently, the deposit insurance coverage limit (Rs 5,00,000 or approximately USD 6,000), fully protects 97.8 per cent of deposit accounts and 43.1 per cent of deposit value. In the context of the emerging challenges, the DICGC is prioritising risk management, including contingency planning and crisis management frameworks. Digital transformation of all operations is underway. Public awareness campaigns are being refashioned and stepped up. Work on ESG policy is being prioritised alongside a strong focus on climate risk,” Patra said.

Experts at the international conference, including IADI President Alejandro Lopez and IADI Secretary General Dr Eva Hupkes are expected to crystal gaze into the outlook for deposit insurance over the next two days in the context of newer financial technologies, including central bank digital currencies (CBDCs) and tokenised deposits. The issue of climate-related financial risks and the imperative of putting in place crisis preparedness and business continuity management procedures and policy frameworks will also be taken up at the brainstorming session.

Patra said that India is also leveraging its digital public infrastructure to be at the forefront of the digital revolution sweeping the world. The Unified Payments Interface (UPI) provides immediate money transfer through mobile devices round the clock 24 by 7 all year round and brings access to multiple bank accounts and various financial services under a single app. India is also engaged in interlinking UPI with fast payment systems (FPS) of other countries to make cross-border payments instant and efficient.

He highlighted that the RBI has joined Project Nexus, a multilateral international initiative conceptualised by the Innovation Hub of the Bureau of International Settlements (BIS) to enable instant cross-border retail payments by interlinking FPSs of Malaysia, Philippines, Singapore, Thailand and India.

Project Nexus facilitates quicker, cheaper, and more reliable cross-border payments, boosting international trade and commerce. Small and medium-sized enterprises (SMEs) in India benefit from reduced transaction costs and faster payment cycles, improving their cash flow and competitiveness in the global market.

The RBI deputy governor also said the Government of India has announced that the net zero target would be achieved by 2070 along with other climate goals ahead of net zero. The RBI has issued a framework for the acceptance of green deposits and a disclosure framework on climate-related financial risks in 2024 which envisages climate-related disclosures. The Government of India has also been issuing sovereign green bonds, he said.

These developments are defining milestones in the DICGC’s journey of six decades. Under its “paybox plus” mandate, the Corporation is authorised to make an interim payment of claims within a stipulated timeline to depositors of banks placed under restrictions on deposit withdrawals (even before liquidation or amalgamation), Patra added.

He said the global financial landscape is changing rapidly. For deposit insurers and other financial safety net participants, it is a race to stay ahead of the curve amidst these tectonic shifts.

Patra said that the conference would aim at enhancing the collective understanding of the emerging challenges “so that we adapt, prepare and remain relevant and meaningful in inspiring public confidence and preserving financial stability.”