Wednesday, November 30, 2011

Bankers ask NRB to lower deposit insurance premium

Central bank has directed the commercial banks to get their small deposits insured as soon as possible but Nepal Bankers Association (NBA) is lobbying to get deposit insurance premium lowered.
The banks have difficulty in paying the deposit insurance premium, said NBA's president Ashoke Rana in an official meeting with the governor Dr Yubaraj Khatiwada at the central bank today.
The Nepal Rastra Bank (NRB) needs to consider revising the premium, he requested, urging to separate premium on the basis of class of financial institutions.
The Class A- commercial banks, Class B-development banks, Class C-finance companies and Class D-microcredit institutions should have different premium rates, according to the association.
But Khatiwada pointed out that the insurance premium depends on the business size and risks on which regulator cannot interfere. "The central bank can do nothing in premium as it comes under the Deposit and Credit Guarantee Corporation that is a government entity," he said.
The deposit insurance is a safety mechanism that will cushion the fall of any banks and financial insititutions incase it goes into liquidation, so the banks need to get their deposits insured soon, Khatiwada said, adding that the central bank is open to more dialogues.
The governor also asked the banks to publish stress related indicators in their monthly balance sheet that they publish every month.
Both the fiscal and monetary policy of the current fiscal year had directed the commercial banks to get their small deposits up to Rs 200,000 insured by the deposit insurer Deposit and Credit Guarantee Corporation (DCGC) by the end of current fiscal year. The central bank is also planning to fine the banks and financial institutions that doesnot follow the financial and monetary policy.
The DCGC charges 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.
Deputy governor Maha Prasad Adhikari replying the bankers queries on how the premium is managed, on the occasion, informed that the DCGC is investing premium on the government securities. Among 31 commercial banks, only four — Mega Bank, Citizens Bank International, Machchhapuchhre Bank and Civil Bank — have got their deposits insured by DCGC till date.

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