banking

Context: Bank deposits in India up to Rs 5 lakh is insured by the Deposit Insurance and Credit Guarantee Corporation. This provides a degree of safety to bank depositors.

About Deposit Insurance

• About Deposit Insurance and Credit Guarantee Corporation (DICGC):
  • All deposits and interest income are insured by Deposit Insurance and Credit Guarantee Corporation (DICGC). It is the second oldest insurer in the world.
  • It is a statutory body created by the Deposit Insurance and Credit Guarantee Corporation Act, 1961. 
  • It is a wholly owned subsidiary of RBI.
• Insured banks by DICGC: All Scheduled Commercial Banks, Foreign Banks, Small Finance Banks, Payment Banks, Regional Rural Banks, Local Area Banks, State Co-operative Banks, District Central Co-operative Banks, Urban Co-operative Banks.
  • Primary Cooperative Societies are not covered by DICGC.
• Insurance Cover amount: Currently, the DICGC has raised the insurance cover to 5 lakhs. This covers all the money (Principal + Interest) with the bank e.g., savings, term deposit, recurring deposits etc.
  • Deposits kept in different branches of a bank are aggregated for the purpose of insurance cover and maximum amount of upto rupees 5 lakhs is paid.
  • All funds held in the same type of ownership at the same bank are added together before deposit insurance is determined. If funds are in different types of ownership or are deposited into separate banks they would then be separately insured.
• Insurance Premium: Insurance premium is provided by banks. This amount stands at Rs 12 paisa per Rs 100. 
• Following are not insured by DICGC: Following types of deposits are not covered under DICGC insurance:
  • Deposits of foreign governments.
  • Deposits of Central/State governments.
  • Inter-bank deposits.
  • Deposits of state lank development banks with state co-operative banks.
  • Any amount due on account of and deposit received outside India.
  • Any amount, which has been specifically exempted by the corporation with the previous approval of RBI.
• When does DICGC liable to pay? If a bank goes into liquidation, DICGC is liable to pay to the liquidator the claim amount of each depositor upto Rs 5 lakhs within two months from the date of receipt of claim list from the liquidator.

Context: The Reserve Bank of India (RBI) has joined Project Nexus. a multilateral international initiative to enable instant cross-border retail payments by interlinking domestic Fast Payments Systems (FPSs). 

What is Project Nexus?

• It is a multilateral international initiative to enhance cross-border payments by connecting multiple domestic instant payment systems (IPS) globally. 
• Project Nexus is conceptualised by the Innovation Hub of the Bank for International Settlements (BIS). 
• It aims to connect the IPSs of India, Malaysia, Philippines, Singapore, and Thailand.

Why the Need?

• The RBI has been collaborating bilaterally with various countries to link India’s Fast Payments System (FPS) – UPI, with their respective FPSs for cross-border Person to Person (P2P) and Person to Merchant (P2M) payments. 
• While India and its partner countries can continue to benefit through such bilateral connectivity of FPS, a multilateral approach will provide further impetus to the RBI’s efforts in expanding the international reach of Indian payment systems.
• In over 70 countries today domestic payments reach their destination in seconds at near-zero cost to the sender or recipient. Connecting these IPS to each other can enable cross-border payments from sender to recipient within 60 seconds (in most cases).

Benefits of the Platform

• Project Nexus is designed to standardise the way IPS connect to each other. 
• Rather than a payment system operator building custom connections for every new country that it connects to, the operator can make one connection to the Nexus platform. 
• This single connection allows a fast payments system to reach all other countries on the network and significantly accelerate the growth of instant cross-border payments.

Context: The Reserve Bank of India (RBI) on April 26^th  invited applications from small finance banks meeting specified criteria for becoming regular or universal banks.

Small Finance Banks:

Aim	Provision of savings vehicles primarily to unserved and  underserved sections of the population. Supply of credit to small business units; small and marginal  farmers; micro and small industries; and other unorganized sector entities, through high technology-low cost operations.
Minimum Paid-up capital	100 crores
Regulations	Subject to all prudential norms and regulations of RBI as  applicable to other SCBs(CRR, SLR and CRAR etc.).
Priority Sector Lending targets	75%
Conditions on Loans	· At least 50% of its loan portfolio should constitute loans  and advances of up to Rs.25 lakh E.g.,  Suryodaya small finance bank, Utkarsh SFB etc. SFBs are required to open at least 25% of their total branches in unbanked rural areas.

The eligibility criteria for an SFB to transition into a Universal bank will now be as follows:

• scheduled status with a satisfactory track record of performance for a minimum period of five years;
• shares of the bank should have been listed on a recognized stock exchange;
• having a minimum net worth of ₹1,000 crore as at the end of the previous quarter (audited);
• meeting the prescribed CRAR requirements for SFBs;
• having a net profit in the last two financial years; and
• having GNPA and NNPA of less than or equal to 3 percent and 1 percent respectively in the last two financial years.

What is the UDGAM portal?

• UDGAM refers to Unclaimed Deposits-Gateway to Access information, which is an online portal developed by RBI. 
• It facilitates the registered users to search unclaimed deposits/accounts across multiple banks at one place in a centralised manner.

Are all banks part of the UDGAM portal? 

• As on March 4, 2024, there are 30 banks, which are part of UDGAM portal, and they cover around 90% of unclaimed deposits (in value terms) in Depositor Education and Awareness (DEA) Fund of RBI. 
• The remaining banks are in the process of getting on-boarded.

What are the types of deposits/accounts covered in the UDGAM portal?

• All unclaimed deposits/accounts that are part of Depositor Education and Awareness (DEA) Fund of RBI can be searched in the UDGAM portal.

Can a user settle/ claim his/her unclaimed deposits through UDGAM portal or from RBI?

• The UDGAM portal facilitates only (a) the search of unclaimed deposits/accounts across multiple banks at one place and (b) provides information on the claim/settlement process of each bank (which will be available in the search result). 
• The unclaimed deposits can be claimed only from the respective bank.