Bill placed in JS to double amount of bank depositors’ compensation

The Bank Deposit Insurance Bill (Amendment) 2023 was placed in Parliament today aiming to double the amount of compensation of depositors.

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

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

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

The amended law proposed to increase this compensation from Tk one lakh to Tk two lakh.

In Bangladesh, deposit insurance was introduced in August, 1984. Initially, the amount of insurance coverage was Tk 60,000, which was later extended to Tk one lakh.

Only banks were mentioned in the previous act, while in the proposed law, financial organisations have been included, extending the benefit.

Besides, the Deposit Insurance Trust Fund (DITF) of Bangladesh Bank, a specific fund for depreciated depositors, will be named as the “Deposit Safety Trust Fund”.

The following type 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 proposed Bill, the fund shall not be spent out except for payment of debt to the depositor creditor of the bank wound up.

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

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

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

Each depositor will get the same amount of repayments 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.