Banking pads up to cover a new ground with risk-based deposit insurance

Shifting to a system of risk-based deposit insurance may over time force banks to become even more prudent and mindful of their finances

Of the 22 additional measures announced by Mint Road after its Monetary Policy Committee’s deliberations, the shift to risk-based deposit insurance framework is one of the most significant in the post-reform period. Think of it as tightening the screws on banks’ liability side. What’s less known is that this architecture — radical as it may appear — is not a new concept. It was flagged by the Jagdish Capoor working group on Reforms in Deposit Insurance, 1999; the Committee on Credit Risk Model, 2006 set up by the Deposit Insurance and Credit Guarantee Corporation (DICGC); and the Jasbir