KATHMANDU: Banks and financial institutions (BFIs) will have pay 0.5 percent of their proposed paid-up capital to the Deposit and Credit Guarantee Fund (DCGF) to become its member if a bill on formation of such a body is endorsed by the Parliament. The bill has been registered at the Parliamentary Secretariat, and its passage would convert the existing Deposit and Credit Guarantee Corporation (DCGC) into the DCGF.
DCGC operates deposit guarantee scheme for individual deposits of up to Rs200,000 for commercial banks, development banks, finance companies and micro-credit development banks. It has fixed a premium rate of 0.2 percent. Almost all BFIs are its members. DCGC has been operating credit guarantee scheme for a long, but it started deposit guarantee scheme since 2011-12.
As per the “Initial Contribution Fund” provision in the bill, the BFIs, once having paid the amount, should not pay the premium for that fiscal year. The bill has also provisioned “Special Contribution Fund”, which would be raised from member BFIs if the DCGF’s financial situation worsens due to financial crisis in the country.
As per the bill, the CDGF will insure individual deposits of up to Rs200,000 and beyond as fixed by the government. It will reimburse the guaranteed amount to the depositors after the Nepal Rastra Bank (NRB) writes to it, stating a liquidated member BFI is unable to pay the guaranteed deposits immediately.
The DCGF will seek details about the insured deposit from the liquidator within seven days and one member institution will work as an agent for reimbursing the amount. The insured amount will be reimbursed within three months after the agent starts the work.
The DCGF will operate two separate funds — Deposit Guarantee Fund and Credit Guarantee Fund. Under the Deposit Guarantee Fund, there will be a Deposit Guarantee Risk Fund to bear the risks related to deposits.
As the DCGF will be insuring a huge amount of deposits, its paid-up capital has been proposed at Rs5 billion, while the authorised capital has been set at Rs10 billion. But the board of director of the proposed DCGF has been given the authority to decide on increasing the capital size.
The BFIs have to submit quarterly financial statements, audit report, annual report and other documents as sought by the DCGF. They should provide details about the classification of deposits, number of depositors and deposit amount every month. They should also maintain electronic detailed database about the deposits and depositors.
As per the bill, the DCGF will have the responsibility of reimbursing the guaranteed amount. If a depositor has multiple deposit accounts in a single BFIs, all of them will be counted as one.
In the case of the deposits of board directors, auditors of three years, promoters or one having at least 5 percent stake in the institution, their deposit will be considered as insured by the fund.
The BFIs will have to deposit the premium in advance every three months. But the bill has given the fund the power to direct the BFIs to deposit the annual premium in advance if the fund carries liability beyond its capacity.
