Govt to amend Bank Deposit Insurance Act
The government is going to amend the Bank Deposit Insurance Act 2000 to bring non-bank financial institutions under the deposit insurance scheme in a bid to give more protection to the depositors against any kind of vulnerabilities in the financial institutions, said officials of Bangladesh Bank.
The government will also raise the amount of deposit insurance coverage to Tk 2 lakh from the existing Tk 1 lakh against each depositor, they said.
A BB official said that the central bank had already prepared the proposal of amendment to the Bank Deposit Insurance Act 2000 and it was sent to the ministry of finance on May 5.
As per the existing act, the depositors of the scheduled banks now are facilitated by the deposit insurance scheme but the depositors of NBFIs do not get any facility on the scheme, he said.
A depositor of a bank in favour of his/her current or fixed or saving deposit would get maximum Tk 1 lakh from the deposit insurance trust fund if his or her bank collapses for any reason, according to the existing act.
The Deposit Insurance Act 2000 says in case of an insured bank’s collapse or bankruptcy, BB shall pay an amount equal to the money of each depositor of that bank.
After revising the act, the BB will pay Tk 2 lakh to the account of each depositor of the NBFIs along with the banks.
The official said that the BB has submitted the proposal to the ministry of finance in a bid to give more protection to the depositors against any kind of vulnerabilities in the banking sector including NBFIs.
The official said, ‘We will make a request to the ministry that the BB can change the deposit insurance coverage with approval of the finance ministry from time to time.’
‘The BB has been working to amend the law since 2011. We hope that the government will revise the law in the quickest possible time’, he said.
Another BB official said that deposit insurance was a system established by the government to protect depositors against the loss of their deposits in the event a scheduled bank is unable to meet its obligations to depositors.
Deposit insurance was first introduced in August of 1984 as a scheme as ‘The Bank Deposit Insurance Ordinance 1984’. In July of 2000, the ordinance was repealed by an act called ‘The Bank Deposit Insurance Act 2000’.
The percentage of deposits fully insured is now 84 per cent and the figure will increase significantly when the amount of deposit insurance coverage will be raised to Tk 2 lakh, he said.
The BB raised the rate of premium for the deposit insurance trust fund by issuing a circular in October, 2012, he said.
According to the BB circular, the state-owned, the specialised, the foreign and the private commercial banks have to give 0.08 per cent as risk-based premium rate instead of 0.07 per cent to the central bank’s deposit insurance trust fund with effect from 2013.
The problem banks as per BB CAMELS rating have to give 0.10 per cent and early warning banks have to give 0.09 per cent as risk-based premium.
The risk-based premium rate of the banks may also be fixed for the NBFIs, the official said.
BB’s cumulative deposit insurance revenues stood at around Tk 2,657 crore this month. Most of the fund is invested in the government securities.
The banks have to give the premium against their total saving, current and fixed deposits of the clients.
If an insured bank collapses or becomes bankrupt, the BB will give insurance coverage to the depositors from the deposit insurance fund.
-With New Age input
