An International Refereed Management Journal of FMS, Gurukul Kangri (Deemed to be University), Haridwar
Varda Sardana, Shubham Singhania
Purpose: This study investigates the sufficiency, income sources, and influencing factors of India's Deposit Insurance Fund (DIF). It evaluates the fund's solvency, analyzes income streams, and proposes measures to strengthen sustainability. By examining the interplay between premium income, investment returns, and recoveries, it emphasizes the need for policy interventions like a target reserve ratio to enhance resilience.
Research Methodology: The study employs descriptive analysis covering 24 years (1999 2000 to 2022-2023). It assesses the DIF's solvency, the contribution of income sources such as bank premiums, investment income, and recoveries from failed banks, and explores determinants affecting premium and investment income.
Findings: India's DIF has shown consistent growth, with its sustainability relying on sound income management and strategic policies. While premium income has declined in recent years, investment income has increased, reducing the gap between these major income sources. The growing dependence on investment returns underscores the need for optimizing fund management. High tax burdens negatively impact overall income, constraining reinvestment potential and returns.
Originality: The study offers a long-term, data-driven analysis of the DIF, revealing shifts in income dynamics and the underexplored impact of taxation. It contributes novel insights for emerging economies on maintaining fund adequacy and designing responsive policy frameworks.
Policy Implications: Adopting a target reserve ratio could improve crisis preparedness. Tax relief on fund income would support reinvestment and boost returns. Policymakers should address declining premium trends and enhance investment strategies to ensure solvency and meet future obligations effectively.