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Thursday
February 2020
11:32 AM IST
News Headlines
Ishant is hitting good areas, Prithvi should follow instincts: Kohli hints on playing XI        PCB chief hints at Pakistan giving up Asia Cup hosting rights        First 5G handset in India likely to be priced at Rs 50,000        Coronavirus outbreak to hit global growth; to have limited impact on India: RBI Guv        Death toll from China virus surges past 2,000        Necessary to prevent statelessness when nationality laws are changed: UN chief        Maha CM visits Shivneri Fort on Shivaji''s birth anniversary        Can transport minister come to explain govt proposal for introducing EVs, asks SC        SC upheld right to protest but other citizens also have rights: Interlocutors at Shaheen Bagh        Won't rule out playing 2023 World Cup, says Taylor        Sachin Tendulkar wins Laureus Sporting Moment Award for 2011 WC triumph        Messi, Hamilton share Laureus World Sportsman of Year honour; Biles gets third award        Kerala tourism eyes robust growth in domestic tourist footfalls in 2020        RBI Governor says no reason to doubt govt will meet fiscal deficit targets        UK budget on March 11 as planned: new finance minister        Wuhan hospital director dies of coronavirus        Opening of Kartarpur Corridor practical proof of Pakistan's desire for peace, says UN chief        People of Delhi taught a lesson to BJP which it will remember for long time: Gehlot        Delhi court sends Sharjeel to judicial custody till Mar 3 in New Friends Colony anti-CAA violence case        Prashant Kishor questions Nitish Kumar's development in Bihar        
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Business News
Deposit insurance hike: RBI says not to hit banks balance-sheets
 
Mumbai: The Reserve Bank does not see any major impact on the balance-sheets of banks due to the five-fold hike in deposit insurance to Rs 5 lakh.

Following the failure of a number of cooperative banks, with the city-based PMC Bank being the latest and the largest last year, the budget allowed the Deposit Insurance and Credit Guarantee Corporation (DICGC) to raise deposit insurance coverage to Rs 5 lakh from Rs 1 lakh.

"The premium is something, which we consider, will increase from 10 paise to 12 paisa per Rs 100 for the time being. So, the impact on banks' balance sheets is not likely to be much," RBI Deputy Governor B P Kanungo told reporters during the post-policy presser.

The hike in deposit insurance coverage has been a long pending demand from bank depositors and it recently came to fore after the crisis at Punjab & Maharashtra Cooperative (PMC) Bank. It can be noted that in 2019 alone more than 30 cooperative banks went belly up in Maharashtra alone.

The DICGC, a wholly-owned subsidiary of the Reserve Bank, provides insurance cover on bank deposits. At present, the DICGC provides Rs 1 lakh insurance to a depositor regardless of the deposit amount, in case the lender fails or gets liquidated.

The corporation insured each bank depositor up to a maximum of Rs 1 lakh for both principal and interest amount held by them as on the date of liquidation/cancellation of a bank's licence or the date on which the scheme of amalgamation/merger comes into force.

It can be recalled that way back in 2009, the Raghuram Rajan committee on financial sector reforms had recommended strengthening the capacity of the DICGC, a more explicit system of prompt, corrective action, and making deposit insurance premia more risk-based.

On the PMC Bank crisis, Das said the administrator and the advisory committee now have greater clarity with regard to the financial position of the bank and they are working out the next course of action.

The multi-state co-operative bank has been put under an RBI administrator since September 23, 2019, after the regulator found financial irregularities including under reporting of loans and non performing assets of real estate developer HDIL.

The central bank also sacked the board of the bank and appointed an administrator.

In September, it was reported that the co-operative lender's actual exposure to the bankrupt HDIL was over Rs 6,500 crore -- which is 73 per cent of its entire assets of Rs 8,880 crore.

Meanwhile welcoming the budget proposal to make the RBI the full regulator of cooperative banks, deputy governor MK Jain said, handling the full regulatory control of cooperatives to the RBI will strengthen the hands of the regulator.


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KERALA NEWS
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INTERNATIONAL NEWS
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