Page 7 - Banking Finance September 2024

RBI CORNER

RBI Deputy Governor

moots full cover for small
depositors
A periodic upward revision in the uni-
form deposit insurance coverage of Rs
5 lakh is necessary as India's growth
and formalisation are likely to lead to
a significant rise in primary and sec- Ò»©­
ondary deposits, which might create a
gap between the ideal insurance re-
serve requirement and the available
reserves, Deputy Governor, Reserve
Bank of India, M Rajeshwar Rao said.
Currently, there is a uniform deposit national Association of Deposit Insurers making such payments from previously
insurance coverage of Rs 5 lakh per (IADI) Asia-Pacific Regional Committee accumulated profits or reserves.
depositor of each insured bank in India. International Conference. As a one-time measure, it permitted

"Considering multiple factors like UCBs to transfer the money in the DEF
growth in the value of bank deposits, RBI pulls up UCBs creating to general reserves/free reserves to
economic growth rate, inflation, and Dividend Equalisation provide better treatment of these bal-
increase in income levels, a periodical ances for regulatory capital purposes.
upward revision of this limit may be Fund The credit balances in general re-
warranted. This means that the deposit The Reserve Bank of India asked Urban serves/free reserves shall qualify as
insurer has to be mindful of the addi- Cooperative Banks to stop the practice Tier-I capital, RBI said in a communi-
tional funding and needs to work out of setting up a Dividend Equalisation cation to UCBs.
suitable options to meet the same," Fund (DEF) to pay dividends in the fu- Some UCBs have created the Dividend
said Rao while speaking at the Inter- ture, as current rules distinctly prohibit Equalisation Fund (DEF) through appro-
priation of profits. This was done with
the intent to utilise these balances to
Rural income growth to drive demand: RBI report pay dividends in future years, when
According to RBI's State of the Economy Report, aggregate demand condi- profits are not sufficient or where the
tions are gathering momentum with revival in rural consumption on the back bank has posted a net loss, RBI added.
of growing incomes and are expected to reinvigorate the hitherto subdued
participation of the private sector in total investment. RBI issues norms to im-
According to the report, persistent geopolitical tensions, fears of a potential prove safety of payment
recession in key economies, and financial market volatility driven by diver-
gent monetary policies are casting a shadow on global economic prospects. systems
Despite these challenges, inflation has moderated, albeit grudgingly, across The RBI said non-bank payment sys-
countries. "Headline inflation moderated from its spike in June to 3.5% in tem operators will have to put in place
July, but this was primarily due to the downward statistical pull of base ef- a real-time fraud monitoring solution
fects," the report said. to identify suspicious transactional
behaviour and generate alerts.
The outlook for private capital expenditure is positive according to the re-
port. In the first quarter of 2024-25, the total cost of projects sanctioned or Also, non-bank payment system opera-
assisted was Rs 1,01,433 crore - higher than the quarterly average of Rs tors (PSOs) will have to ensure that an
97,745 crore during 2023-24. Additionally, funds raised through IPOs for online session on mobile application is
capex purposes also increased compared to the previous quarter. automatically terminated after a fixed
period of inactivity and customers are

BANKING FINANCE | SEPTEMBER | 2024 | 7