No government will allow small savers to be affected and there should absolutely no doubt about the deposit guarantee offered by the government on bank deposits, India’s Chief Economic Adviser Arvind Subramanian has said.
He was responding to a query on the concerns about safety on bank deposits caused by the controversial Financial Resolution and Deposit Insurance (FRDI) Bill, which is under discussion.
Mr. Subramanian was in conversation with V. Anantha Nageswaran on the union budget organised by Chennai International Centre at the Madras School of Economics.
“Banks accept short-term money in the form of deposits and lend for long-term purposes. The system works on confidence. Two things are essential. One is effective regulation and second is deposit guarantee,” he said.
Even with private sector participation in bank the deposit guarantee scheme would be continued, which has been a global practice and the government won’t allow run on the bank, Mr. Subramanian said.
