BANKING AFFAIRS

Detailed explanation-1: -The concept of insuring deposits kept with banks received attention first time in the year 1948 after the banking crises in Bengal. The question came up for reconsideration in the year 1949, but it was decided to hold it in abeyance till the Reserve Bank ensured adequate arrangements for inspection of banks.

Detailed explanation-2: -Federal deposit insurance became effective on January 1, 1934, providing depositors with $2, 500 in coverage, and by any measure it was an immediate success in restoring public confidence and stability to the banking system.

Detailed explanation-3: -IInitially, under the provisions of Section 16(1) of the DICGC Act, the insurance cover was limited to 1, 500/-only per depositor(s) for deposits held by him (them) in the “same right and in the same capacity” in all the branches of the bank taken together.

Detailed explanation-4: -It assures small depositors that their deposits are safe, and that their deposits will be immediately available to them if their bank fails. It maintains public confidence in the banking system, thus fostering economic stability.

Detailed explanation-5: -On June 16, 1933, President Franklin Roosevelt signed the Banking Act of 1933, a part of which established the FDIC.