Page 9 - Banking Finance November 2022

BANK UPDATE

The prize was announced by the Nobel "The politics of phone banking had average cost of maintaining these ac-
panel at the Royal Swedish Academy made banks unsafe, put them in a hole, counts for a bank is almost the same.
of Sciences in Stockholm. made the economy unstable and led to When balances grow, banks tend to
scams of thousands of crores," Modi benefit from PMJDY. So the Centre
The committee said their work had
said, while listing steps taken by his needs to make the scheme more at-
shown in their research "why avoiding
administration to clean up the system. tractive or the pace of growth in the
bank collapses is vital." Nobel prizes
number of accounts will be slow,'' said
carry a cash award of 10 million Swed-
ish kronor (nearly $900,000) and will be Deposits in Jan Dhan ac- a senior executive with a public sector
bank.
handed out on Dec. 10.
counts cross Rs. 1.75-lakh
Unlike the other prizes, the econom-
crore as on Oct 5 DICGC rejects banks' plea
ics award wasn't established in Alfred
The total balance in the basic bank
Nobel's will of 1895 but by the Swed- to exempt CDs from insur-
accounts under the Pradhan Mantri
ish central bank in his memory. The
Jan Dhan Yojana (PMJDY) has crossed ance cover
first winner was selected in 1969.
The Deposit Insurance and Credit
the Rs. 1.75 lakh crore mark.
Last year, half of the award went to
Guarantee Corporation (DICGC) has
David Card for his research on how the As per the latest Government data, the
rejected a request made by banks to
total balance stood at Rs. 1,75,225
minimum wage, immigration and edu-
exempt certificates of deposit (CDs)
crore as on October 5, 2022, as the
cation affect the labor market. The
from deposit insurance coverage.
other half was shared by Joshua Angrist total number of beneficiaries touched
Bankers' underscored that CDs, which
and Guido Imbens for proposing how 47 crore. Women beneficiaries own a
have a tenor of up to one year, are is-
to study issues that don't easily fit tra- larger chunk in the scheme at 26.16
sued in minimum denomination of Rs.
ditional scientific methods. crore account of which the bulk (31.42
5 lakh and in multiples of Rs. 5 lakh
crore accounts) are in rural and semi-
thereafter, usually to institutional in-
urban areas.
Digital has put an end to
vestors, but DICGC's deposit insurance
"Public sector banks (PSBs) have made
'phone banking': PM cover is only available for deposits up
significant contribution. Of the total to Rs. 5 lakh.
PM Narendra Modi unveiled digital
Rs. 1.75 lakh crore balance, PSB's ac-
banking units (DBUs) in 75 districts Currently, banks pay an insurance pre-
count for Rs. 1.35 lakh crore, followed
across the country and said that the mium of 12 paise per Rs. 100 of de-
by Regional Rural Banks with Rs.
economy is as strong as its banking posit, including CD, raised.
34,573 crore,'' a senior official of State
system and the government had taken Banks' request to exempt CDs from
Bank of India told.
multiple steps to make the financial DICGC coverage comes even as they
According to bankers, implementation
system robust since 2014. Modi said have augmented funds mop up via CDs
of some benefits under Pradhan Mantri
that banking has become a tool for since June 2022 due to liquidity tight-
good governance and better service Garib Kalyan Yojana (PMGKY) during ness in the market. Deposit insurance
delivery. the Covid-19 pandemic had established premium payment leads to outgo of
PMJDY as the preferred channel to
While maintaining that there had been funds.
access govt schemes in view of direct
a shift from 'phone banking' - a term The outstanding CDs of banks (net of
benefit transfer and drove people es-
the Modi government has coined to repayments) increased by Rs. 62,171
pecially in rural areas to open ac-
describe interference in sanctioning crore from Rs. 1,89,977 crore as on
counts.
loans to a select few during the UPA June 03, 2022, to Rs. 2,52,148 crore as
tenure - to 'digital banking'. He said "However, the fear about Jan Dhan on September 23, 2022, with the rate
that bankers would earlier receive calls being white elephants for banks lin- of interest rising from 4.89-5.89 per
from "the top" and were told how they gers. The average balance in an ac- cent to 5.81-6.73 per cent during the
should function and lend. count hovers around Rs. 3,000, and the said period.
BANKING FINANCE | NOVEMBER | 2022 | 9