Insurance premium may go down
KATHMANDU,DEC 15:
The deposit insurance premium might be revised downwards to accommodate increased amount of small deposits, according to the insurer.
“The central bank is mulling over reducing the premium charge along with increasing the amount of deposits to be insured to Rs 500,000 on the second half of the current fiscal year,” said general manager of Deposit and Credit Guarantee Corporation (DCGC) Bhola Prasad Sharma Adhikari.
Though, both the fiscal and monetary policy of the current fiscal year had directed the commercial banks to get their small deposits of up to Rs 200,000 insured by the deposit insurer, the commercial banks were hesitating citing the high deposit insurance premium.
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, financial institutions can not directly charge the customers for the deposit insurance premium making the insurance addition to their expenditures.
However, the central bank has asked all the 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.
“However, the corporation and central bank are allowing the banks and financial institutions to insure their small deposits of up to Rs 200,000 for the time being, but we need to comply with the government’s directive sooner,” he added.
The commercial banks through Nepal Bankers Association (NBA) have been lobbying to get deposit insurance premium lowered citing the excess financial burden to the banks especially with the increased amount.
The commercial banks have started to get their deposits insured as Nepal Rastra Bank (NRB) specifically asked them to get it done or face the music.
Mega Bank had signed the deposit insurance agreement with the insurer this September being the first one but since then only few had come voluntarily without the central bank pushing them.
The large banks were apprehensive about the insurance fee that they got to pay for being in possession of huge deposit base. Most of the banks will have to pay deposit premium of millions of rupees thus contracting their profit.
“Once all the financial institutions get their deposit insured, the corporation is going to conduct sample study in order to figure out whether the banks and financial institutions have provided right figures regarding small deposit,” pointed out Adhikari.
The corporation has insured deposit worth Rs 115 billion so far. Everest Bank is the bank with largest amount of small deposits worth Rs 10 billion followed by Nepal Investment Bank with Rs 7 billion of small deposits, according to the corporation.
As of today, 21 commercial banks have got their small deposits worth up to Rs 200,000 insured including the big names.
The corporation has already got small deposits of 84 development banks, 73 finance companies and two microfinance institutions’ covered.
The deposit insurance for development banks, finance companies and microfinance banks had started in February 2011.
NIBL, BoAN insure
Four commercial banks including Nepal Investment Bank, Bank of Asia Nepal, Siddhartha Bank and NMB Bank got their small deposits of up to Rs 200,000 insured with Deposit and Credit Guarantee Corporation on Wednesday.
Source: THT
