Going by the bylaw, Nepali BFIs can now insure their savings and fixed deposits up to Rs 200,000 at the corporation from July 17. Such facility can be bought for the deposits of natural persons only; meaning the corporation will not insure deposits of BFIs institutional clients like business firms and legal entities. [break]
If the client BFI went bankrupt and liquidated, the corporation should safely refund money of the depositors within 90 days of the submission of depositors´ list by the liquidator.
“The service, which will start from the coming fiscal year, will completely safeguard the deposits of the people maintaining savings and fixed accounts of as much as Rs 200,000 at BFIs. We believe this will up people´s confidence on the banking system,” said an official at Ministry of Finance.
However, depositors must know that all banks and financial institutions still might not pledge such guarantee because the government has not made deposit insurance compulsory.
“Since joining the scheme is voluntary, the customers opening the accounts must categorically ask the bank whether or not it has covered their deposits from possible risks,” the source said.
To get the service, the BFIs will need to pay service charge of 20 paisa per every Rs 100 worth of insured deposit sum to the corporation. Only the BFIs that are not declared as troubled institution can participate in the scheme.
The corporation will also monitor the BFIs credit portfolio and performances regularly. But, if the BFIs failed to maintain the capital fund as instructed by the Nepal Rastra Bank, they will need to pay 10 paisa extra for every Rs100 worth of insured deposit.
“We have made a conscious effort not to add cost to the BFIs. Hence, the rate has been fixed at nominal level,” said a source.
The corporation has also endorsed a plan to raise its paid-up capital to Rs 1 billion in order to build its capacity to shoulder the new liability. It has also sought additional Rs 1 billion from the government as seed money to build the compensation fund.
Under its recapitalization plan, the corporation is increasing its paid-up capital to Rs 250 million within the next one month. For the purpose, it has called special general meeting on Wednesday.
It is further mulling over injecting additional Rs 350 million from its internal source and has also invited stake investment from BFIs to increase the capital to Rs 1 billion.
Apart from this, the corporation is also hopeful of getting assistance from the World Bank and Asian Development Bank, as the multinational donors have indicated of pledging the support in case Nepal introduced the mechanism of safeguarding deposits of laymen.
Related story
Lending slows as banks focus on recovery of loans at fiscal yea...
