Page 28 - Insurance Times November 2023

Safeguarding the

Banking System in an

Environment of

Financial Cycles by

Understanding Bankers Sapna Maheshwari

Associate Director
Indemnity Policy Anand Rathi Insurance Brokers Ltd.
PSU and Banking Business

Reserve Bank of India (RBI), mandates that banks have appropriate indemnity policies in place.
These policies are not just a matter of choice but a regulatory requirement to ensure the stability
and integrity of the banking system. Compliance with these requirements is essential as it helps
maintain public confidence in the financial system and protects the interests of stakeholders.

In the world of finance, trust is paramount. Bank customers to the banking sector. These risks can include employee
place their hard-earned money in the hands of financial misconduct, errors and omissions, and other vulnerabilities
institutions with the expectation that their assets will be safe that banks may encounter. In the Indian context, where
and well-managed. But what happens when an employee banking is a critical component of the financial sector, this
within a bank engages in fraudulent activities or errors that insurance is essential to ensure the stability and
result in financial losses for the institution? This is where a trustworthiness of the banking system.
Bankers Indemnity Policy comes into play, offering protection
for the financial health and integrity of the bank. Key takeaway.

Mandatory Regulatory Requirement
What is a Bankers Indemnity Policy?
Reserve Bank of India (RBI), mandates that banks have
Banker's Indemnity Insurance is meticulously designed to appropriate indemnity policies in place. These policies are
address the unique risks and challenges faced by the banking not just a matter of choice but a regulatory requirement to
industry. There is no denying the fact that banks handle ensure the stability and integrity of the banking system.
public funds and are therefore vulnerable to risk when Compliance with these requirements is essential as it helps
dealing with cash and securities. maintain public confidence in the financial system and
protects the interests of stakeholders.
A Bankers Indemnity Policy is a bundled cover that provides
broad coverage against operational risk faced by a bank. This Insurance Risk Mapping
is perfect cover as it provides uniform coverage with a single The process of insurance risk mapping serves as a bridge
insurer eliminating the danger of gaps occurring between
between estimating operational risk capital and managing
individual policies.
insurable risks within a bank. This process involves
identifying, assessing, and quantifying the various risks a
The policy is intentionally designed to provide extensive
protection, addressing a variety of operational risks specific bank faces and then using insurance to mitigate or transfer

The Insurance Times November 2023 27