Amid growing concerns over high premiums, Nepal Rastra Bank (NRB) has
started homework on revising the premium rate on the deposit insurance
by the banks and financial institutions (BFIs).
The central bank is considering to revise the premium rate from the next fiscal year, according to a highly placed NRB source.
“We have decided to revise the rate as the insurance fund has been created in large amount in the last two years and there is also a reduction in depositors’ risk due to the NRB regulation,” said the source.
With an aim to safeguard the small depositors, the NRB, under the Deposit Insurance Bylaw-2010, had directed the commercial banks to insure the individual deposit up to Rs 200,000 with the Deposit and Credit Guarantee Corporation (DCGC). The NRB has fixed the annual premium rate at 20 paisa per Rs 100 for the purpose. It has made the provision mandatory for the ‘A’ class financial institutions after having earlier implemented the provision for the B, C and D class BFIs.
However, the ‘A’ class BFIs have been complaining that the current premium rate is too high, asking the central bank either to reduce the premium rate or to increase the insurance limit up to Rs 500,000 if the current rate is to remain fixed.
Ashok Rana, chief executive officer of Himalayan Bank, termed the existing rate as useless. “Although the premium charge has not affected our daily operation, the current rate bears no scientific
meaning amid increasing insurance fund with the DCGC,” said Rana. He demanded the government to reduce the premium rate to 0.1 percent from the existing 0.2 percent of the deposits.
Initially, the premium rate was fixed with an aim to increase the paid up capital of the DCGC, which stood at Rs 480 million at the time the NRB enforced the regulation. Following the government’s move, the DCGC’s paid up capital was raised by additional Rs 500 million. The DCGC is reported to be collecting premium worth Rs 460 million annually out of the insured deposit worth 230 billion of the BFIs.
Rana said the government agency had also agreed to reduce the premium rate after it’s paid up capital increased to Rs 1.6 billion. “However, it has failed to implement its commitment so far,” he added.
“Compared to its revenue, DCGC’s liabilities have appeared negligible in the last three years,” said the NRB source. “So, it is appropriate to revise the premium rate amid increasing risk compliance fund.”
src : kathmandu post
The central bank is considering to revise the premium rate from the next fiscal year, according to a highly placed NRB source.
“We have decided to revise the rate as the insurance fund has been created in large amount in the last two years and there is also a reduction in depositors’ risk due to the NRB regulation,” said the source.
With an aim to safeguard the small depositors, the NRB, under the Deposit Insurance Bylaw-2010, had directed the commercial banks to insure the individual deposit up to Rs 200,000 with the Deposit and Credit Guarantee Corporation (DCGC). The NRB has fixed the annual premium rate at 20 paisa per Rs 100 for the purpose. It has made the provision mandatory for the ‘A’ class financial institutions after having earlier implemented the provision for the B, C and D class BFIs.
However, the ‘A’ class BFIs have been complaining that the current premium rate is too high, asking the central bank either to reduce the premium rate or to increase the insurance limit up to Rs 500,000 if the current rate is to remain fixed.
Ashok Rana, chief executive officer of Himalayan Bank, termed the existing rate as useless. “Although the premium charge has not affected our daily operation, the current rate bears no scientific
meaning amid increasing insurance fund with the DCGC,” said Rana. He demanded the government to reduce the premium rate to 0.1 percent from the existing 0.2 percent of the deposits.
Initially, the premium rate was fixed with an aim to increase the paid up capital of the DCGC, which stood at Rs 480 million at the time the NRB enforced the regulation. Following the government’s move, the DCGC’s paid up capital was raised by additional Rs 500 million. The DCGC is reported to be collecting premium worth Rs 460 million annually out of the insured deposit worth 230 billion of the BFIs.
Rana said the government agency had also agreed to reduce the premium rate after it’s paid up capital increased to Rs 1.6 billion. “However, it has failed to implement its commitment so far,” he added.
“Compared to its revenue, DCGC’s liabilities have appeared negligible in the last three years,” said the NRB source. “So, it is appropriate to revise the premium rate amid increasing risk compliance fund.”
src : kathmandu post
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