DCGC starts deposit insurance

HIMALAYAN NEWS SERVICE

KATHMANDU: The deposit insurance scheme has been formally launched with two finance companies getting their savings and fixed deposits insured by Deposit and Credit Guarantee Corporation (DCGC). It signed the first agreement with Capital Merchant Banking and Finance followed by Kuber Merchant Finance for insuring savings and fixed deposits.

DCGC’s deputy general manager Jagadish Kumar Chalise and the finance company’s chief executive officer (CEO) Dipak Raj Sharma signed the agreement on behalf of their respective institutions here yesterday.

The deposit guarantee scheme has finally gained momentum after the central bank made small deposit insurance of up to Rs 200,000 mandatory for the Class-B and Class-C financial institutions two weeks ago.

The deposit insurance of one hundred more development banks and financial institutions including that of Sanima Bikas Bank, Ace Development Bank, Birgunj Finance and Shangrila Development Bank is in the pipeline.

“As per the deposit guarantee regulation, in case of bankruptcy of a financial institution, a small depositor, who has a deposit up to Rs 200,000, will get the total deposit amount and interest within 90 days from the date the institution goes under liquidation,” said Bhaskar Mani Gyanwali, chairman of DCGC that has fixed Rs 0.2 as guarantee fee for every Rs 100 worth of deposits held at the financial institutions, to be paid in half-yearly basis.

Though the regulation regarding the deposit guarantee for the microfinance institutions had come into effect from July 17, none of these Class-D financial institutions have come to DCGC for insuring their deposits as these financial institutions did not have authority to collect deposits. To initiate the deposit insurance the central bank had opened deposit collection for Class-D microfinance companies and cooperatives in the monetary policy of the current fiscal year.

The provision not only protects small depositors’ money in the bank but can also benefit financial institutions as they can assure depositors regarding safety and recovery of the deposits even if the institution collapses.

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