Depositors to get double compensation

A Bank Deposit Insurance Bill (Amendment) 2023 was placed in parliament yesterday aiming to double the amount of compensation for depositors. 

Finance Minister AHM Mustafa Kamal placed the bill, which was sent to the parliamentary standing committee on the finance ministry for further scrutiny.

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The committee was asked to submit its report within 30 working days.

As per the current law, a depositor gets a maximum of Tk 1 lakh as compensation within 90 days if any scheduled bank or financial institution goes into liquidation.

The amended law proposed to increase this compensation to Tk 2 lakh.

In Bangladesh, deposit insurance was introduced in August 1984 while the amount of insurance coverage was Tk 60,000, which was later increased to Tk 1 lakh.

Only banks were mentioned in the previous act whereas financial organisations have been included in the proposed law.

Besides, a Deposit Insurance Trust Fund (DITF) of Bangladesh Bank will be renamed "Deposit Safety Trust Fund."

The following types of money shall be deposited to the fund - (a) money received from insured banks as well as financial institutions; (b) income received from the bank wound up under section 7; (c) money received from the investment of money from the fund; and (d) money received from other sources.

According to the proposed bill, the fund shall not be spent out except for payment of debt to the depositor or creditor of the bank wound up.

The proposed act suggested that Bangladesh Bank could primarily restrict deposits from being received by the banks and financial organisations if they fail to pay insurance premium for two consecutive times.

Moreover, the central bank will have the authority to shut or liquidate them if the same incident is repeated for a third time.

After the order of liquidation of banks and financial organisations, Bangladesh Bank will have to pay insurance money or a maximum of Tk 2 lakh to the depositors from the Deposit Safety Trust Fund.

Each depositor will get the same amount of compensation even if they had several accounts with the banks or financial organisations, the draft act stated.

Deposit Insurance Systems is an institutional initiative to protect depositors against the loss of their deposits in the event that a scheduled bank goes into liquidation.

All scheduled banks or commercial banks, including the branches of foreign banks functioning in Bangladesh, are insured by the Deposit Insurance Systems.