BS EDIT: Bank curbs and deposit safety: Time for better protection?

Banking crisis & depositor risk

• RBI’s curbs on New India Cooperative Bank expose regulatory gaps

• Cooperative banks face mismanagement and inefficiency

• Should depositors bear the cost of banking failures?

Limited deposit insurance

• Only Rs 5 lakh of deposits insured under DICGC

• Just 43.1 per cent of accessible deposits covered

• Government may increase the limit soon

Trust is key to banking stability

• Asset-liability mismatches make banks vulnerable

• Tech adoption allows real-time fund shifts, adding risk

• Bank runs can spread panic, as seen in the SVB collapse (2023, US)

Need for stronger regulation

• Better oversight can prevent banking failures

• Depositors shouldn’t bear the risk of mismanagement

• Insurance for all individual accounts can boost confidence

Who should bear the cost?

• Expanding insurance has costs—shared by depositors, banks & govt

• Guaranteed safety prevents panic withdrawals & strengthens stability

Balancing safety & risk

Unlimited protection could encourage reckless banking

Regulatory oversight must ensure responsible risk management

Only bank deposits, not risky investments, should be insured