More commercial banks plan deposit insurance

HIMALAYAN NEWS SERVICE


KATHMANDU: More commercial banks are planning for deposit insurance despite their initial apprehensions about the insurance premium.


“Citizens Bank International and Machchhapuchhre Bank are ready to sign deposit insurance agreement with us,” informed general manager of Deposit and Credit Guarantee Corporation (DCGC) Bhola Prasad Sharma Adhikari.


“Everything has been settled, only the signing of the agreement is left,” he added.


Similarly, Sunrise Bank, Kist Bank, Bank of Asia Nepal and Nepal Bank Ltd are in talks with DCGC to insure the small deposits up to Rs 200,000.


Mega Bank had signed the deposit insurance agreement with the insurer in September becoming the first class ‘A’ financial institution to get its small deposits insured.


Both the fiscal and monetary policy of the current fiscal year had directed the commercial banks to get their small deposits up to Rs 200,000 insured by the deposit insurer by this fiscal year.


Though, Nepal Rastra Bank (NRB) has asked all banks and financial institutions to increase the deposit insurance amount from the existing Rs 200,000 to Rs 500,000 as per Immediate Relief Package 2068 of the present government, DCGC will allow the banks and financial institutions to insure their small deposits up to Rs 200,000 for time being.


“We are planning to gradually increase the insurance amount to Rs 500,000 as sudden revise in the amount can be difficult to cope for the banks and financial institutions,” informed Adhikari.


Though most of the development banks and finance companies have followed the central bank’s order to get their small deposits insured, commercial banks are not yet to be convinced.


Earlier, commercial bankers were trying to negotiate the insurance fee calling the existing rate high. The DCGC charges Rs 0.2 as guarantee fee for every Rs 100 worth of eligible deposits held at the financial institutions annually that is required to pay on half yearly basis.


Moreover, banks and financial institutions can not directly charge the customers for the deposit insurance premium making the insurance addition to their expenditures.


The bankers are also in doubt DCGC’s ability to reimburse the small deposits incase of failure of the financial institutions. DCGC has paid up capital of Rs 980 million but with the commercial bank in the picture it will be undertaking the insurance of estimated deposits of Rs 200 billion.


The DCGC has recently sent formal letters to commercial banks inviting them for insurance and central bank and finance ministry are also doing their part in encouraging them to get their deposits insured, according to Adhikari.


The deposit insurance for development banks, finance companies and microfinance banks had started in February 2011. One commercial bank, 77 development banks, 69 finance companies and one microfinance bank have already got their deposits insured with the DCGC. “We have so far insured small deposits worth Rs 98 billion and additional insurance of Rs 100 billion worth deposits are expected from commercial banks,” Adhikari added.

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