FIs insure Rs 22b slab with DCGC

POST REPORT
Bookmark and Share
Bookmark

KATHMANDU, MAR 30 -
Financial institutions (FIs) have insured a total of Rs 22 billion of their deposits with Deposit and Credit Guarantee Corporation (DCGC) as of Wednesday.

On Feb.16, the Nepal Rastra Bank had directed B, C and D class financial institutions to insure their fixed and saving deposits up to Rs 200,000 collected from individuals. However, deposits collected from corporate bodies and deposits exceeding Rs 200,000 need not be insured.

The government, through last year’s budget, had announced that individual deposits up to Rs 200,000 in B, C and D class FIs will be insured to save ordinary depositors from potential bank failures. The need for deposit insurance was felt after the liquidation of Nepal Development Bank.

According to DCGC, a total of 31 B class and 37 C class financial institutions have insured their deposits collected from around 470,000 individuals. “Almost 90 percent of the country’s BFIs have inquired about the deposit insurance process,” said the DCGC. “Most of the Kathmandu-based FIs have insured their deposits.”

A total of 83 development banks and 79 finance companies are operating in the country and they have estimated deposits of Rs 150 billion. “Of the total deposits, Rs 30 billion belongs to individuals,” said NRB Spokesperson Bhaskar Mani Gyawali. “We have not set any deadline for FIs to insure their deposits. As FIs themselves are responsible institutions, we hope all of them will insure their deposits as per their convenience.”

However, D class FIs are yet to get their deposits insured as they were not allowed to collect deposits. Now, D class FIs, including Swabalamban Bikas Bank, Chhimek Bikas Bank and Nirdhan Bikas Bank, have received NRB approval to collect deposits. “They have started the process of insuring deposits,” said Jagadish Chalise, deputy general manager of DCGC.

If an FI having insured its deposits goes into liquidation, DCGC will return individual deposits up to Rs 200,000 to its depositors. The board of the FIs should select a representative to sign agreement with DCGC to insure deposits.

DCGC has set the advance annual premium amount based on FIs’ classes. As per the DCGC provision, national level development banks, regional level development banks, finance companies and micro-finance institutions have to pay Rs 50,000, Rs 25,000, Rs 20,000 and Rs 5,000, respectively, as premium.

The annual premium amount has been fixed at 20 paisa per Rs 100. As per the Deposit Insurance Bylaw-2010, premium will not be refunded to member FIs. FIs failing to maintain capital adequacy ratio will have to pay an additional premium of 10 paisa per Rs 100. Insurance can be claimed if any FI is liquidated. Liquidator can claim a maximum of Rs 200,000 including principal and interest, as per the bylaw.

The government also plans to strengthen the financial status of DCGC, as it has to insure a huge amount.

http://www.ekantipur.com/the-kathmandu-post/2011/03/30/money/fis-insure-rs-22b-slab-with-dcgc/220053.html