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What are Depository Institutions Deregulation and Monetary Control Act?
The Depository Institutions Deregulation and Monetary Control Act took place in the US in the year 1980. This act had a powerful impact on the Federal Reserve Bank as well as the nationalized banks all over the world. It laid the foundation for open transactions in the financial world. The DIDMCA was signed under the presidency of Jimmy Carter.
The following rules were passed under the act. They were as follows:
a) More rights should be given to the non-members of the banks
b) Banks should be allowed to draft their own interest rates
c) Banks were allowed to actively participate in mergers, acquisitions, takeovers, and Joint ventures
d) It lessens the power of the Federal reserve bank in each and every economy
e) Every bank is supposed to take insurance from the Fed bank and thus secure its cash inflow
f) It provided greater leverage to all the banks around the world
g) It deregulated the strict rules of the Fed bank
These were the above changes that were brought by the DIDMCA in 1980. From the above points, it is very clear that the act brought many deregulations into the banking system. It gave more power to the nationalized banks which made them independent and the decision-making process.
Allowing mergers and joint ventures gave them a fair chance to the banks to expand their branches and increase their cash flow. If banks were allowed to make their interest rate then it will save time and energy from the lengthy process of permissions.
Thus money is easily available to people and people can buy their homes, cars, etc via loans. Even higher education can be funded through loans.
These were the advantages of the DIDMCA Act of 1980. Banks became more liberal in their approach and were easily available to the masses. In the same pattern, many regulations and acts were passed to make the economy an open economy. These acts and policies are made so that the citizens of all countries can make the best use of the money they pay in form of taxes to the government. This is the DIDMCA of 1980.