What does FRDI mean in FINANCE
FRDI stands for Financial Resolution and Deposit Insurance. This term was first used in India in 2018, and since then it has been gaining much attention from the public, banks, customers and other financial institutions. In simple terms, FRDI is an insurance scheme designed by the Indian government to protect the money deposited in Indian banks or other financial institutions in case of any sudden financial crisis. The main aim of this policy is to provide a safety net to bank depositors from unexpected events like bank closure or afinancial crisis leading to liquidity crunch. To ensure that depositors are adequately protected, the scheme provides them with a deposit insurance coverage of up to INR 5 lakhs per person.
FRDI meaning in Finance in Business
FRDI mostly used in an acronym Finance in Category Business that means Financial Resolution and Deposits Insurance
Shorthand: FRDI,
Full Form: Financial Resolution and Deposits Insurance
For more information of "Financial Resolution and Deposits Insurance", see the section below.
What does FRDI mean
FRDI means that all deposits made with any financial institution operating within India - whether it be banks, non-banking finance companies (NBFCs), and co-operative societies - are insured against default up to a maximum amount of INR 5 lakhs per person. This coverage is provided regardless of whether the deposit was made at one single institution or multiple organisations. It also means that should there ever be a situation where bank closure or liquidation leads to losses for depositors, the scheme will ensure they receive up to INR 5 lakhs as compensation for their losses.
Essential Questions and Answers on Financial Resolution and Deposits Insurance in "BUSINESS»FINANCE"
What is Financial Resolution and Deposits Insurance?
Financial Resolution and Deposits Insurance (FRDI) is an insurance program designed to protect customers’ deposits in financial institutions from losses due to insolvency of the bank. It provides protection for people who put money into a savings account, or other type of deposit product offered by banks and other financial firms.
How does FRDI work?
FRDI helps protect customers against the risk of loss in case their financial institution fails. The insurance scheme guarantees that the customer will get back the amount deposited up to a certain limit as specified by the scheme. In case of bankruptcy or liquidation of the bank, FRDI ensures that customers receive their deposits without any losses or delays.
Is it mandatory for all banks/financial institutions to be covered under FRDI?
Yes, it is compulsory for all banks in India to be covered under FRDI. Banks regulated by the Reserve Bank of India need to maintain a reserve with RBI which is used to provide protection under this scheme.
What kind of deposits are covered under FRDI?
All types of deposits which are accepted by banks and other financial institutions are protected under this scheme including savings accounts, fixed deposits, current accounts and even some mutual fund investments.
Does FRDI offer coverage for existing deposit accounts?
Yes, existing deposit accounts are automatically covered under this insurance policy when they are transferred from one bank to another or when a new account is opened at an existing bank branch. Therefore, existing customers do not have to re-register their deposits with FRDI.
Is there a ceiling on insured deposits?
Yes, currently there is a maximum insured deposit limit per person in any single bank which stands at Rs 5 lakhs (as per 2019). This means if your total deposit amount exceeds Rs 5 lakhs then you may be liable for any losses that occur beyond that amount. Additionally, if your total aggregate deposits exceed Rs 1 crore then only 90% of your total deposited amount will be insured up to a maximum limit of Rs 5 lakhs per person in each insured bank or institution where such funds have been parked.
Are joint accounts eligible for protection under FRDI?
Yes, Joint Accounts between two individuals are also eligible for coverage provided both individuals together do not cross the upper limit as stated earlier (i.e Rs 1 crore). Also note that depositors holding joint accounts will be individually protected up-to Rs 5 lakhs even if both holders reach the upper limit jointly; however only separately held individual's account balances can avail full protection beneath each depositor's name.
Final Words:
Overall, FRDI is an important government initiative which seeks to protect depositors' hard-earned money in times of financial crisis or bank closure situations. By providing an insurance cover of up to INR 5 lakhs per person against loss due to default by any organisation operating within India's banking space, FRDI serves as an excellent source of protection for individuals who have invested their money into such institutions in good faith.
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