Briefly describe the evolution of deposit insurance in India.
Ans. The evolution of Deposit Insurance can be traced as follows:
(a) In 1938, Travankore National and Quilon Bank failed and consequently, interim measures relating to making legislations and reform instituted in early 1940s.
(b) In 1960, two banks failed in India: Laxmi Bank and Palai Central Bank. It catalyzed the need for the introduction of deposit insurance in India.
(c) Finally, Deposit Insurance Corporation (DIC) came into force on January 1, 1962.
(d) An amendment in 1968, qualified cooperative banks for deposit insurance. In 1968, there were 1000 cooperative banks as against 83 commercial banks.
(e) In 1971, CGCI (Credit Guarantee Corporation of India) was established. The aim of CGCI was in the realm of affirmative action to ensure that the credit needs of the neglected and weaker sections were met.
(f) In 1978, the DIC and CGCI were merged to form the DICGC (Deposit Insurance and Credit Guarantee Corporation.
(g) Now it is operating with primary significance to deposit insurance.
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