Summary of “Premium Defaulting Banks Barred from Taking Deposits,” by Mir Mostafijur Rahman, The Financial Express, 12 June 2023July 4, 2023
The Bank Deposit Insurance (Amendment) Bill has been introduced to strengthen measures aimed at safeguarding the interests of depositors. Provisions include that if a bank or financial institution fails to pay premiums to the central bank’s Deposit Protection Trust Fund for two consecutive terms, they will be prohibited from accepting deposits. Previously, the regulation did not set a specific delinquency period, stating merely “more than one [term].”
The amendment also suggests imposing fines on the delinquent bank or financial institution for the duration of the delay. In such cases, they are required to pay interest on the premium money based on the bank rate.
Additionally, in the event of liquidation, the compensation for depositors will be doubled. According to the bill, upon liquidation, the depositors will be repaid their due arrears or US$2,000, whichever is lower, from the protection trust fund administered by the central bank. Presently, the maximum amount payable to depositors is US$1,000.
The bill has been sent to the parliamentary standing committee on the finance ministry for review and submission of reports. According to the law, depositors must be paid within 180 days following the liquidation of any bank or financial institution, which occurs when a bank or financial institution repeatedly fails to pay premiums.
The Bangladesh Bank manages the Deposit Protection Trust Fund, and commercial banks and financial institutions are insured by this trust fund. If the funds deposited with the trust are insufficient to cover the amount owed to depositors, the government must borrow money from the central bank to repay the depositors’ funds.