The Ministry of Finance (MoF) has already finalized the draft act and will soon forward it to the Ministry of Law and Justice.[break]
The act has been drafted as part of the budgetary program, in which Finance Minister Surendra Pandey promised to safeguard small deposits up to Rs 200,000 in the event of collapse of BFIs.
The act has proposed to make it mandatory for banks and financial institutions to register themselves at the Deposits Guarantee Fund, for which they will contribute 20 paisa per Rs 100 of deposit received.
"Keeping in view that the deposit of small depositors can be at risk at any time, the proposed act has incorporated all classes of banks and financial institutions (BFIs) under the deposits guarantee scheme. The act is aimed at protecting the hard earned deposits of small depositors who would be entitled to get refund of deposited amount even in the case of winding up of any bank or financial institution," an official at the MoF told Republica.
Nepal Rastra Bank (NRB) -- the central bank will make it mandatory for BFIs to make guarantee of deposits up to prescribed level in order to safeguard savings of small depositors.
As per the proposed act, the depositors who would lose their deposits with the bankruptcy of the deposit recipient bank, would get compensation within seven days after the liquidator submits the report to the Deposits Guarantee Fund. Before refunding the lost amount to depositors, the fund will issue a 15-day notice calling the depositors to make their claims for refund.
"The whole process of settlement wouldn´t take longer than one and a half months which would be great relief to the depositors," said the source.
In a bid to make sure that Deposit and Credit Guarantee Corporation -- an agency that will implement the program -- fulfills the liability, the draft act has proposed raising its paid-up capital to Rs 2 billion. As part of this envisaged capital upgrading, the government has already allocated Rs 250 million for the corporation in the budget for the current fiscal year.
Currently, banks have mobilized well over Rs 623 billion in deposits. Financial institutions, including development banks, finance companies, micro-finance development banks and co-operatives, too have mobilized well over Rs 165 billion from the public.
Of that, the central bank estimates the volume of small deposits -- up to Rs 200,000 -- in financial institutions alone stand well around Rs 20 billion.
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