Plea to reduce insurance premium
KATHMANDU:
The bankers are demanding cutback of deposit insurance premium being charged by Deposit and Credit Guarantee Corporation for commercial banks before opting to get their deposits insured.
“The premium of Rs 0.2 per Rs 100 worth of deposit amounts to a large sum for the commercial banks that has large number of small deposits,” said president of Nepal Bankers’ Association (NBA) Ashok Rana.
Deposit and Credit Guarantee Corporation has set 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. The financial institutions are not allowed to charge the depositors any service charge for the facility.
“Commercial banks — especially the older and well established ones — should not be viewed through the same glass that has more paid up capital and less chances of getting insolvent,” he pointed out.
Nepal Bankers’ Association is in talks with Nepal Rastra Bank (NRB) to negotiate the premium delaying the commercial banks application for the deposit insurance yet, he informed.
Th budget and monetary policy for the current fiscal year 2011-12 have extended the small deposit insurance scheme to the commercial bank also. The central bank decreed the class ‘A’ financial institutions to undergo deposit insurance in its latest circular.
Now, the commercial banks also have to insure the small deposit up to Rs 200,000 with Deposit and Credit Guarantee Corporation.
The bankers are also doubting Deposit and Credit Guarantee Corporation’s ability to reimburse the small deposits incase of failure of the financial institutions. The Deposit and Credit Guarantee Corporation has a paid up capital of Rs 480 million only but it has to insure small deposits worth Rs 100 billion at present.
However, chairman of Deposit and Credit Guarantee Corporation Bhaskar Mani Gyanwali assured that Deposit and Credit Guarantee Corporation being a government entity will be backed by the government in case its funds become insufficient in paying back the deposits.
“Paid up capital is not the issue, the government is giving additional Rs 500 million this fiscal year to strengthen Deposit and Credit Guarantee Corporation’s capacity,” he pointed out.
Deposit and Credit Guarantee Corporation regulation that was passed on July 2010 states that in case of bankruptcy of any financial institution, a natural depositor, who has a deposit of up to Rs 200,000, will get the total deposit amount with interest within 90 days from the date the institution going under liquidation.
“Deposit and Credit Guarantee Corporation has already insured deposits worth Rs 50 billion of ‘B’, ‘C’ and ‘D’ class financial institutions, Gyanwali said, adding that there will be additional deposits worth Rs 100 billion of the commercial banks.
The deposit insurance for development banks, finance companies and microfinance banks had started in February.
Some 72 development banks, 67 finance companies and one microfinance bank have already insured their small deposits with Deposit and Credit Guarantee Corporation.
Source: THT
The bankers are demanding cutback of deposit insurance premium being charged by Deposit and Credit Guarantee Corporation for commercial banks before opting to get their deposits insured.
“The premium of Rs 0.2 per Rs 100 worth of deposit amounts to a large sum for the commercial banks that has large number of small deposits,” said president of Nepal Bankers’ Association (NBA) Ashok Rana.
Deposit and Credit Guarantee Corporation has set 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. The financial institutions are not allowed to charge the depositors any service charge for the facility.
“Commercial banks — especially the older and well established ones — should not be viewed through the same glass that has more paid up capital and less chances of getting insolvent,” he pointed out.
Nepal Bankers’ Association is in talks with Nepal Rastra Bank (NRB) to negotiate the premium delaying the commercial banks application for the deposit insurance yet, he informed.
Th budget and monetary policy for the current fiscal year 2011-12 have extended the small deposit insurance scheme to the commercial bank also. The central bank decreed the class ‘A’ financial institutions to undergo deposit insurance in its latest circular.
Now, the commercial banks also have to insure the small deposit up to Rs 200,000 with Deposit and Credit Guarantee Corporation.
The bankers are also doubting Deposit and Credit Guarantee Corporation’s ability to reimburse the small deposits incase of failure of the financial institutions. The Deposit and Credit Guarantee Corporation has a paid up capital of Rs 480 million only but it has to insure small deposits worth Rs 100 billion at present.
However, chairman of Deposit and Credit Guarantee Corporation Bhaskar Mani Gyanwali assured that Deposit and Credit Guarantee Corporation being a government entity will be backed by the government in case its funds become insufficient in paying back the deposits.
“Paid up capital is not the issue, the government is giving additional Rs 500 million this fiscal year to strengthen Deposit and Credit Guarantee Corporation’s capacity,” he pointed out.
Deposit and Credit Guarantee Corporation regulation that was passed on July 2010 states that in case of bankruptcy of any financial institution, a natural depositor, who has a deposit of up to Rs 200,000, will get the total deposit amount with interest within 90 days from the date the institution going under liquidation.
“Deposit and Credit Guarantee Corporation has already insured deposits worth Rs 50 billion of ‘B’, ‘C’ and ‘D’ class financial institutions, Gyanwali said, adding that there will be additional deposits worth Rs 100 billion of the commercial banks.
The deposit insurance for development banks, finance companies and microfinance banks had started in February.
Some 72 development banks, 67 finance companies and one microfinance bank have already insured their small deposits with Deposit and Credit Guarantee Corporation.
Source: THT
