DCGC may have to wait to start deposit gurantee

Deposit and Credit Guarantee Corporation (DCGC) may have to wait before it starts deposit guarantee scheme.

In the Monetary Policy for 2010-11, the central bank has made it mandatory for class-D micro finance institutions to guarantee deposits up to Rs 200,000. But class-D micro finance institutions were not allowed to collect deposit from the public except from their members till July 16.

The central bank allowed them to collect deposit from public from July 17. From the same date, DCGC has also started the deposit guarantee scheme for the deposits of up to Rs 200,000 of these institutions.

According to the central bank, only those class-D institutions can collect deposit from the public which have been posting profits for last three consecutive years.

Some of the institutions, which have fulfilled the central bank's criterion, have applied for the approval from the central bank to collect deposit from the public claiming that they have fulfilled the criterion fixed by the central bank to collect deposit from the public.

"Once they get approval from the central bank, they come to us for the deposit guarantee," said Jagdish Chalise, deputy general manager at DCGC that is planning to guarantee the deposits to safeguard the small depositors. "DCGC is fully prepared to entertain them."

The fiasco of Nepal Development Bank (NDB) that has been sent to liquidation by the Patan Appellet Court has compelled the central bank to guarantee the small deposits to prevent such incidents, where small depositors could lose their hard-earned savings.

Though, almost all the depositors of the bank got their deposit back, NDB is the first bank in the history of Nepal to be sent to liquidation after its financial health deteriorated and was beyond revival.