One-fifth of the total deposits in financial institutions belonging
to individual savers are safe for being covered deposit insurance.
Deposit and Credit Guarantee Corporation (DCGC) has covered small deposits worth Rs 230.9 billion deposited at 187 financial institutions under its deposit insurance service.
The amount is equivalent to 20 per cent of total deposits with class ‘A’, ‘B’, ‘C’ and ‘D’ financial institutions that have reached Rs 1,165 billion, till a month ago. More than 7.5 million depositors that have saved up to Rs 200,000 will not lose their deposits even if the financial institution where deposit is made collapses for being covered by mandatory deposit insurance.
“If the definition of smaller deposit is increased to more than existing up to half a million rupees and at the same time reduce the premium rate then more deposits can be protected,” said CEO of Rastriya Banijya Bank, Krishna Prasad Sharma. The public sector bank has one of the largest deposit base at Rs 80 billion up to the end of third quarter of fiscal year 2012-13.
In the recently announced monetary policy, NRB has said that deposit insurance premium will be lowered. At present, financial institutions are annually paying Rs 0.2 as guarantee fee for every Rs 100 worth of eligible deposits held at the financial institutions.
“The premium or guarantee fee of Rs 0.2 per Rs 100 is exorbitant and it will reduce cost of insuring deposit significantly for the banks, we are expecting it to be reduced by half,” pointed out Sharma whose bank has smaller deposit up to Rs 18 billion. “It will be better if central bank imposes risk-based deposit insurance premium rate,” he added.
The regulation requires the commercial banks, development banks, finance companies and deposit collecting microfinance institutions to get their small deposits up to Rs 200,000 insured by DCGC. The banks have been reluctant to go for deposit insurance calling the insurance premium expensive, but in August 2011, NRB made it mandatory.
Last year’s monetary policy had announced to increase deposit insurance upto Rs 300,000 but it did not get implemented. With some financial institutions under crisis, deposit insurance has helped to contain the panic among depositors. At present, there are eight financial institutions that are declared ‘crisis-ridden’ by the central bank.
src THT
Deposit and Credit Guarantee Corporation (DCGC) has covered small deposits worth Rs 230.9 billion deposited at 187 financial institutions under its deposit insurance service.
The amount is equivalent to 20 per cent of total deposits with class ‘A’, ‘B’, ‘C’ and ‘D’ financial institutions that have reached Rs 1,165 billion, till a month ago. More than 7.5 million depositors that have saved up to Rs 200,000 will not lose their deposits even if the financial institution where deposit is made collapses for being covered by mandatory deposit insurance.
“If the definition of smaller deposit is increased to more than existing up to half a million rupees and at the same time reduce the premium rate then more deposits can be protected,” said CEO of Rastriya Banijya Bank, Krishna Prasad Sharma. The public sector bank has one of the largest deposit base at Rs 80 billion up to the end of third quarter of fiscal year 2012-13.
In the recently announced monetary policy, NRB has said that deposit insurance premium will be lowered. At present, financial institutions are annually paying Rs 0.2 as guarantee fee for every Rs 100 worth of eligible deposits held at the financial institutions.
“The premium or guarantee fee of Rs 0.2 per Rs 100 is exorbitant and it will reduce cost of insuring deposit significantly for the banks, we are expecting it to be reduced by half,” pointed out Sharma whose bank has smaller deposit up to Rs 18 billion. “It will be better if central bank imposes risk-based deposit insurance premium rate,” he added.
The regulation requires the commercial banks, development banks, finance companies and deposit collecting microfinance institutions to get their small deposits up to Rs 200,000 insured by DCGC. The banks have been reluctant to go for deposit insurance calling the insurance premium expensive, but in August 2011, NRB made it mandatory.
Last year’s monetary policy had announced to increase deposit insurance upto Rs 300,000 but it did not get implemented. With some financial institutions under crisis, deposit insurance has helped to contain the panic among depositors. At present, there are eight financial institutions that are declared ‘crisis-ridden’ by the central bank.
src THT
