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Q82 (CDS-II/2024) Economy › Economy Current Affairs › Economy Current Affairs Answer Verified

Consider the following statements: 1. A rupee Vostro account is an account that an Indian bank holds for a foreign bank in the domestic currency (rupee) to enable domestic banks to provide international banking services. 2. Insurance density, i.e., average insurance premium per capita does not fully capture the financing gap in the event of a premature death because most of the insurance products sold in India are savings-linked with a small component of protection. Which of the statements given above is/are correct?

Result
Your answer: —  Â·  Correct: C
Explanation

Statement 1 is correct as a Vostro account (from the Latin 'vostro' meaning 'yours') is an account held by a domestic bank on behalf of a foreign bank in the domestic currency. It enables foreign banks to provide international banking services and settle cross-border transactions in Indian Rupees without having a physical presence in India [1]. Statement 2 is also correct. Insurance density is defined as the ratio of premium to total population (per capita premium). In India, this metric fails to accurately reflect the actual protection or financing gap because a significant portion of life insurance products are savings-linked or investment-oriented (like ULIPs or endowment plans) rather than pure term insurance. Consequently, while the premium paid (density) might appear high, the actual life cover or 'protection' component remains low, leaving a substantial financing gap in the event of the policyholder's premature death.

Sources

  1. [1] https://openknowledge.worldbank.org/bitstreams/5ca2f75a-1ea1-5ce4-9904-b2d8550ffec3/download
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