DCGC covers one-fifth deposits

KATHMANDU, NOV 4: 

One-fifth of the total deposits of individual depositors in licensed financial institutions are being covered by deposit insurance. 

Deposit and Credit Guarantee Corporation (DCGC) has covered small deposits worth Rs 210.9 billion deposited at 184 financial institutions under its deposit insurance service. The amount is equivalent to 20 per cent of the total deposits with class ‘A’, ‘B’, ‘C’ and ‘D’ financial institutions, which has reached Rs 1,067 billion, as of mid-September. 

“Deposits of up to Rs 200,000 in more than 7.4 million individual accounts have been insured by DCGC,” said general manager of DCGC Bhola Prasad Sharma Adhikary. Deposit insurance works as a safety mechanism that cushions the fall of any bank in case it goes into liquidation and salvages the small depositors’ savings from disappearing in the aftermath. 

Regulation requires commercial banks, development banks, finance companies and deposit collecting microfinance institutions to get their small deposits of up to Rs 200,000 insured by DCGC. 

All financial institutions have got small deposits insured by the deposit insurer starting last August after both the monetary and fiscal policies of fiscal year 2011-12 made it mandatory. 

This year’s monetary policy has decided to increase the deposit insurance amount to Rs 300,000 which will be implemented later in the year. Last year, government’s Immediate Relief Package 2068 had announced to increase insurance amount to Rs 500,000, but it did not materialise.

Deposits amounting to Rs 194 billion of 6.9 million depositors was insured till mid-April 2012 by 193 financial institutions comprising of around 35 per cent of total individual deposits. The steady growth in the deposit amount and accounts with financial institutions has also increased the amount of insured deposits. 

“All small depositors are now assured that their deposits of up to Rs 200,000 will not be lost, no matter what happens to the financial institution where they have deposited their money,” Adhikary said, pointing out that deposit insurance is one factor that has brought back trust financial institutions for the general public –– source of small deposits. 

DCGC, at present, covers deposits worth Rs 155 billion belonging to 32 commercial banks, Rs 38 billion of 84 development banks, 

Rs 16 billion of 66 finance companies, and small savings worth Rs 775 million of two microfinance development banks. 

DCGC, that charges Rs 0.2 as guarantee fee for every Rs 100 worth of eligible deposits held at financial institutions, earned Rs 210 million as insurance premium.

Source: THT