been a persistent demand from stakeholders and public representatives in the bis central bankers ’ speeches recent past for a hike in deposit insurance cover from the current level of ₹1 lakh. the deposit insurance systems around the world have evolved over time by reforms adopted by various jurisdictions based on experience, international developments, guidance from supra national bodies like imf, international association of deposit insurers ( iadi and other environmental changes from time to time. one of the basic principles of deposit insurance is that the deposit insurance system should cover at least 80 % of the deposit accounts and 20 – 30 % of the total assessable deposits. in india, we have surpassed this norm in a substantial way ; as on march 31, 2015, our dicgc ’ s deposit insurance covers as high as 92. 3 % of the deposit accounts and 31 % of the total assessable deposits. 18. therefore, before deciding on this demand, we have to factor in two major issues viz., the moral hazard issue and the risk based premium issue. deposit insurance inherently creates a moral hazard i. e. the parties to the deposit insurance viz. a bank and its insured depositors get an incentive to take more risk because the costs of risk, in whole or in part, are borne by others, generally a deposit insurance agency, in our case the deposit insurance and credit guarantee corporation ( dicgc ). most deposit insurance systems initially adopt an ex - ante flat - rate premium system because they are relatively simple to design, implement and administer. however, these systems were open to criticism in that they do not reflect the level of risk that banks pose to the deposit insurance system. flat - rate premium systems have also been viewed as being unfair as “ low - risk ” banks are required to pay the same premium as “ higher - risk ” banks. with no inbuilt incentive for “ higher risk ” banks to improve their risk profile, a flat rate system would accentuate the moral hazard problem. therefore the primary objective of most differential premium systems has been to provide incentives for banks to avoid excessive risk taking, minimise moral hazard and introduce more fairness into the premium assessment process. introducing fairness into the system bolsters industry support for deposit insurance. a hike in cover without calibrating the premium rates to the risk profile of the insured banks only exacerbates the moral hazard. recognising this, a committee on differential premium system for banks in india ( chairman : shri ja

by global developments for public debt management and its linkages with macroeconomic stability and strategies thereof, lessons and outcomes of product innovations as also market infrastructure for government bonds. given the span of issues intended to be covered during the conference, i would like to make a few general observations with focus on the challenges posed to policy making for emerging market and developing economies ( emdes ) in the area of debt management in the context of recent developments in the global economy as well as the way forward to manage the uncertainties which have become certainty in an interconnected world. recent global developments : risk and challenges for emdes 4. the current public debt management forum takes place against the backdrop of a still weak global economy, especially in advanced economies ( aes ) where growth in some countries still remains weak. indeed, the global financial crisis has dramatically changed the policy environment. risks – old and new – continue to dominate the outlook and new policy challenges are arising not only in macroeconomic policy but also in debt management framework, both for emdes and also the aes. 5. going a little in the past, we know the world economy was ambushed with full blown financial crisis in 2008 – 09 and the growth in world economy had slowed down markedly from bis central bankers ’ speeches 5. 4 per cent in 2007 to 2. 8 per cent in 2008 and further to around half a per cent during 2009. the crisis which erupted in the us and other aes with unravelling of sub - prime crisis soon traversed to the emdes, reflecting elevated inter - connectedness among countries in the backdrop of increasing external openness and cross - border financial flows. the growth in emdes also declined from 8. 7 per cent in 2007 to 2. 7 per cent during 2009. the governments across large number of countries had undertaken fiscal stimulus measures in order to contain the slowdown and revive growth, and this translated into steep increase in the government market borrowing. it was really challenging for debt managers, especially in emdes to complete the increased market borrowing in a non - disruptive manner. subsequently, the european sovereign debt crisis unfolded in which the elevated debt levels coupled with sub - optimal debt structure in some of the european countries ( i. e. high share of short - term debt and greater share of foreign investors ’ holding ) triggered a major rollover risk for these countries ( chart 1 ). 6. the contagion emanating from the european sovereign debt crisis coupled with elevated market borrowing requirement amplified the challenges for