Deposits of 1.4 million individuals are safe
KATHMANDU, JUN 19 -
People’s deposits worth Rs 55 billion put in B, C and D class financial institutions (FIs) are safe as the amount has been insured by the Deposit and Credit Guarantee Corporation (DCGC).
The government-owned entity started insuring individual deposits up to Rs 200,000 from the current fiscal year.
A total of 138 FIs have so far got deposits of 1.4 million people guaranteed. Of the 138 FIs, 137 are development banks and finance companies and one is a micro-finance institution. Deposits of institutional depositors, however, are not insured as per the existing budgetary provision.
There are a total of 88 development banks, 78 finance companies and 19 micro-finance companies in the country. “The size of insured deposits will be much bigger after commercial banks start insuring their deposits from the next fiscal year,” said DCGC Chairman Bhaskarmani Gyawali. According to DCGC, an estimated amount of Rs 170 billion will be insured after commercial banks get their deposits guaranteed.
The need for deposit insurance was felt following the liquidation of Nepal Development Bank in 2009. Now, as one after another financial institutions are landing in trouble as a result of bad corporate governance and liquidity crunch, the central bank is pushing for a wider deposit insurance coverage. “People having deposits up to Rs 200,000 should not worry if the FIs concerned have signed the deposit insurance agreement with DCGC,” said Gyawali, who is also the spokesperson for the Nepal Rastra Bank.
However, there are concerns over whether DCGC is strong enough financially and has the expertise to pay the insured amount if a colossal financial crisis hits the economy. With the recent addition of capital from the government, DCGC’s paid-up capital has reached Rs 480 million. Gyawali said DCGC has demanded an additional Rs 55 million from the government for the next fiscal year. The government aims to increase its capital to Rs 2 billion within the next two years.
Nepal Finance Companies’ Association President Rajendra Man Shakya said DCGC may find it difficult to pay the amount of insurance coverage if the country witnesses a huge financial crisis like that in the US in 2008 and East Asian crisis in 1997. “Moreover, people want immediate payment of their insured amount rather than after the liquidation of the company concerned,” he said.
As per the bylaws of the deposit guarantee scheme, after the bankruptcy of an FI, depositors will be compensated within seven days after the liquidator submits its report to DCGC.
However, Gyawali said nobody should worry about timely compensation as DCGC is a government entity. “Currently, DCGC has a bigger paid-up capital than Nepal Bank Limited and people trust government entities,” he said. According Gyawali, DCGC is currently training its staffers to enhance their competence. “We will make fresh recruitment in the next fiscal year,” he said. DCGC currently has 30 employees.
Source: Kantipur
People’s deposits worth Rs 55 billion put in B, C and D class financial institutions (FIs) are safe as the amount has been insured by the Deposit and Credit Guarantee Corporation (DCGC).
The government-owned entity started insuring individual deposits up to Rs 200,000 from the current fiscal year.
A total of 138 FIs have so far got deposits of 1.4 million people guaranteed. Of the 138 FIs, 137 are development banks and finance companies and one is a micro-finance institution. Deposits of institutional depositors, however, are not insured as per the existing budgetary provision.
There are a total of 88 development banks, 78 finance companies and 19 micro-finance companies in the country. “The size of insured deposits will be much bigger after commercial banks start insuring their deposits from the next fiscal year,” said DCGC Chairman Bhaskarmani Gyawali. According to DCGC, an estimated amount of Rs 170 billion will be insured after commercial banks get their deposits guaranteed.
The need for deposit insurance was felt following the liquidation of Nepal Development Bank in 2009. Now, as one after another financial institutions are landing in trouble as a result of bad corporate governance and liquidity crunch, the central bank is pushing for a wider deposit insurance coverage. “People having deposits up to Rs 200,000 should not worry if the FIs concerned have signed the deposit insurance agreement with DCGC,” said Gyawali, who is also the spokesperson for the Nepal Rastra Bank.
However, there are concerns over whether DCGC is strong enough financially and has the expertise to pay the insured amount if a colossal financial crisis hits the economy. With the recent addition of capital from the government, DCGC’s paid-up capital has reached Rs 480 million. Gyawali said DCGC has demanded an additional Rs 55 million from the government for the next fiscal year. The government aims to increase its capital to Rs 2 billion within the next two years.
Nepal Finance Companies’ Association President Rajendra Man Shakya said DCGC may find it difficult to pay the amount of insurance coverage if the country witnesses a huge financial crisis like that in the US in 2008 and East Asian crisis in 1997. “Moreover, people want immediate payment of their insured amount rather than after the liquidation of the company concerned,” he said.
As per the bylaws of the deposit guarantee scheme, after the bankruptcy of an FI, depositors will be compensated within seven days after the liquidator submits its report to DCGC.
However, Gyawali said nobody should worry about timely compensation as DCGC is a government entity. “Currently, DCGC has a bigger paid-up capital than Nepal Bank Limited and people trust government entities,” he said. According Gyawali, DCGC is currently training its staffers to enhance their competence. “We will make fresh recruitment in the next fiscal year,” he said. DCGC currently has 30 employees.
Source: Kantipur
