The agreement was reached during a meeting with top Nepal Rastra Bank (NRB) officials, said Ashok Shumsher Rana, CEO of Himalayan Bank and president of Nepal Bankers´ Association (NBA).[break]
With the inclusion of these big players in the insurance scheme launched by the central bank, deposits of all individuals, who have parked up to Rs 200,000 in commercial banks, development banks and finance companies, will now be secured, regardless of insolvency of these institutions.
Realizing that insulating small deposits and thereby ensuring the confidence of small depositors in the country´s banking system is of critical importance, NRB initiated the practice of insuring deposits up to Rs 200,000. To begin with, development banks and finance companies were first directed to insure the deposits with DCGC. These financial institutions have already abided by the central bank´s direction.
Similar directive was also issued to commercial banks. But since the order did not come with a deadline, so far only 10 banks, including Mega, Citizens, Civil, Machhapuchchhre, Standard Chartered, Nepal SBI, Bank of Kathmandu and Lumbini, have followed the NRB instruction, according to Bhola Prasad Sharma Adhikari, general manager of DCGC. NCC bank signed an agreement with the DCGC to insure its deposits on Wednesday itself.
The rest have been dragging their feet, saying the premium of 20 paisa for the insurance of every Rs 100 is too high.
“This issue has now been settled as the central bank has promised to see what can be done after six months, when the next round of premium amount has to be paid to DCGC,” Rana said, reiterating that the banks will begin insuring deposits from mid-December.
Once the deposits are insured, individuals who have deposited up to Rs 200,000 need not worry even if the banks go bankrupt as DCGC will take the responsibility of compensating the victims.
However, the process of distributing the compensation amount may take some time as the court will first have to issue an order to liquidate the bank and appoint a liquidator. This means the victims may not get their deposit back immediately after the banks are declared ´troubled´, as widely expected.
As of Tuesday, deposits of Rs 81.5 billion belonging to over 2.38 million individual depositors were insured with DCGC, which has been given the sole authority by the central bank to insure deposits.
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