Bangladesh Bank (BB) will raise the flat-rate premium by 0.01 to 0.02 percent for deposit insurance to minimise the risk connected to the loss of depositors’ funds with the scheduled banks, officials of Banking Division under the finance ministry said.

“The Banking Division has already given its consent on the hike in premium rate under the deposit insurance trust fund” said a senior official of the finance ministry’s wing. He also said the central bank will announce the new premium rate soon.

As per a proposal, BB will raise premium rate on deposit insurance by the state-owned commercial banks, non-banking financial institution, and private commercial banks including those under the early warning system and problem banks category. The banks that are now under an early warning system will have to pay such premium at 9 paisa per Tk 100 deposited, which was earlier 7 paisa, according to the BB proposal.

The amount payable as premium for the problem banks will be 10 paisa instead of 9 paisa and 8 paisa for other banks, which was previously 7 paisa. Deposit insurance system was first introduced in Bangladesh in August 1984 aiming to minimise the risk of loss of money deposited with banks.

The Deposit Insurance Act 2000 says in case of an insured bank’s collapse or bankruptcy, BB shall pay an amount equal to the money of each depositor of that bank. However this amount will not exceed Tk 200,000, which was earlier Tk 100,000. As per provisions of the law, the premiums collected from the insured banks are deposited in an account called the Deposit Insurance Trust Fund, maintained by the central bank.

News: The Daily Sun/Bangladesh/2nd-Oct-12