Subbarao for sweeping changes in DICGC

Reserve Bank of India Governor D Subbarao has proposed bringing major changes in Deposit Insurance and Credit Guaranteee Corporation...

Reserve Bank of India Governor D Subbarao has proposed bringing major changes in Deposit Insurance and Credit Guaranteee Corporation DICGC a wholly-owned subsidiary of the RBI in a bid to speed up resolution of cases and broaden its mandate.

8220;DICGC is presently working as a pay box system. Going forward,we are examining the possibility of transforming it from a pay-box system to a system attending to all aspects of bank resolution. This may,however,require sweeping reforms including a thorough change in the DICGC Act,1961. However,certain features of the financial sector supervision and regulation as prevailing in India may have to be kept in view. For example,it may not be necessary to have a separate supervisory machinery in DICGC independent of the Reserve Bank as is the practice in some other jurisdictions,notably the United States,8221; Subbarao said.

He also talked about speeding up settling insurance claims. 8220;One key challenge is reducing the time taken to settle claims. Though the Corporation has been able to settle all claims within the statutory time limit,its goal is to go beyond the statutory prescription,and ensure settlement of claims within a few days of liquidation of a bank as against a few months taken now,8221; Subbarao saod.

Towards this end,he said,effort is required in two directions. First,DICGC must have a computerised depositors data base in respect of over 85,000 branches spread across the country. 8220;Second,the entire process of filing claims by the liquidator and their processing by the corporation should be computerized with appropriate connectivity. The Corporation has already initiated steps to move in this direction by formulating an ambitious project of Integrated Claims Management System ICMS,8221; he said at the international conference on funding of deposit insurance systems hosted by DICGC.

The DICGC currently insures principal and interest up to a maximum amount of Rs one lakh. For example,if an individual had an account with a principal amount of Rs 95,000 plus accrued interest of Rs.4,000,the total amount insured by the DICGC would be Rs 99,000. 8220;If one looks even at broad data,it becomes quite clear that this demand had no persuasive force. Under the existing insurance cover,number-wise almost 90 per cent of the deposit accounts are fully covered. Amount-wise,over 60 per cent of total insurable deposits are covered. We determined,therefore,that the cost-benefit calculus was not in favour of enhancing the deposit cover,8221; he said.

Says Timing of stimulus exit still a challenge

MUMBAI: The Reserve Bank of India on Monday said the timing of withdrawing the monetary and fiscal stimuli given to spur the economy poses a challenge to the government as well as the apex bank. There are several challenges on the way forward,including the timing and sequencing of exit from the expansionary fiscal and monetary policies, RBI Governor D Subbarao said while

addressing an international conference on Funding of Deposit Insurance Systems.