The central bank has already implemented the program in development banks, finance companies and micro-finance institutions about six months ago. [break]
They have been asked to compulsorily insure all deposits up to Rs 200,000. With commercial banks going for mandatory insurance of small deposits, the provision will be applicable across the board in the country´s banking and financial system.
"We are soon extending it to the commercial banks as well," said NRB Spokesperson Bhaskar Gyawali.
NRB decision comes in the wake of recent problems faced by some financial institutions (FIs) which turned depositors jittery and triggered a sense of doubt in the country´s financial system.
As a step to assure depositors about safety of their money, Finance and Labor Relations Committee of the Parliament had instructed the central bank this week to extend the insurance of small deposits to the commercial banks as well.
The lawmakers at the Committee have even asked the central bank to raise the ceiling of deposits that BFIs need to insure compulsorily and take steps to widen its cover to deposits in the financial system.
"Internally, we have been working towards raising the slab to at least Rs 500,000. But we will need endorsement from Deposit and Credit Guarantee Corporation (DCGC) — the insurer — to do so," said a source.
So far, 133 FIs, including 66 development banks and 67 finance companies have signed up with DCGC, insuring deposits worth over Rs 51 billion under the policy that the government launched two years ago.
Going by the DCGC bylaws, if any of these companies went bankrupt, DCGC would pay each of their depositors as much as Rs 200,000 within 15 days of receiving due report from the liquidator.
For the service, the FIs have paid 20 paisa as insurance premium per Rs 100 of deposit per year.
Given the present negative market sentiment, the central bank has pressed 29 development banks and finance companies that are still out of the insurance net to comply with its directives at the earliest.
Likewise, the government has injected a fresh capital of Rs 250 million in the state-owned deposit and credit insurer in order to step up its capacity to insure and repay the claims. It has also endorsed a plan to gradually raise DCGC´s capital to Rs 2 billion.
For now, the government is formulating DCGC Act to ensure security guarantee of deposits in all BFIs. Keeping in view the risks faced by depositors, the proposed Act has included all classes of BFIs under the deposit guarantee scheme.
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