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The Reserve Bank of India (RBI) is exploring appropriate deposit insurance coverage for green deposits, climate risk based differential premiums and ex ante funding needs for climate sustainability, according to Michael Debabrata Patra, Deputy Governor.
“Looking ahead, the evolution of the deposit insurance function is likely to confront more complex challenges amidst heightened uncertainty.”
“For instance, climate change is emerging as an overarching risk to the global economy and financial systems,” Patra said in his keynote address at the 79th Executive Committee Meeting of International Association of Deposit Insurers (IADI) at Rome on June 14th.
According to the IADI’s surveys, 60 per cent of Dis (deposit insurers) have formalised Environmental, Social, and Governance (ESG) policies and some are members of the Network for Greening the Financial System (NGFS).
“This is what is keeping us awake in India – framing a comprehensive ESG policy incorporating elements of climate sustainability, investment in sovereign green bonds, measuring the impact of climate change on default risk and contingency planning for climate related extreme events via actuarial analysis,” the Deputy Governor said.
Patra observed that the size of the Deposit Insurance and Credit Guarantee Corporation (DICGC) of India’s Deposit Insurance Fund, measured by its ratio to insured deposits, at 2.02 per cent is comparable with the global median.
The Corporation has targeted the achievement of a ratio of 2.5 per cent by March 2028, he added.
In the context of the DICGC’s portfolio valued at US$ 24.5 billion, Patra said treasury operations are being reinforced with asset-liability management tools, real time monitoring of liquidity and concentration ratios, and periodic value-at-risk and scenario analyses at various confidence levels. A dedicated market risk reserve has also been created.
“Some risk management measures like market borrowing, liquidity support from central bank/government, etc., may necessitate changes in statutory provisions,” he said.
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