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Draft Deposit Protection Act incorporates NBFIs

It proposes indemnity for managing DP trust fund


Ismail Hossain | Published: February 16, 2018 00:33:58


Authorised persons involved in managing 'deposit insurance fund' at the central bank will get indemnity under a proposed law styled, the Deposit Protection (DP) Act, 2017.

The Bangladesh Bank (BB) has prepared the draft of the law that, if adopted by parliament, would replace the existing Bank Deposit Insurance Act 2000.

"Case, criminal proceeding or any form of legal action could not be taken against authorised persons, who carry out their activities or responsibilities with good faith under this act or provisions," a sub-section of the act said.

Banking experts, however, opined that every citizen of the country has the right to get legal service, and it is basic human rights. But this provision is against basic rights.

They also think this provision or section in the law is unnecessary considering the nature of the Act.

Former Bangladesh Bank (BB) governor Dr. Salehuddin Ahmed said it is beyond comprehension why this act needs such a provision.

"It is just not right. It is unnecessary."

He also said a bank depositor or any other citizen has the right to have legal service.

There should be a series of meetings with the stakeholders concerned before finalizing the act, he opined.

BB former deputy governor Khondokar Ibrahim Khalid also termed the section 'superfluous'.

"I don't understand why this act needs this provision. The officials concerned will manage deposit protection fund. Why will they need indemnity for managing a fund?"

Meanwhile, the draft act has the provision to bring the non-bank financial institutions (NBFIs), like the banks, under the purview of deposit insurance scheme to protect the interest of depositors.

The Bank Deposit Insurance Act 2000, offers the bank depositors the insurance coverage of their deposits, if a scheduled bank goes into liquidation.

But deposits with both banks and NBFIs will come under protection scheme, if the proposed law is finally adopted.

Like the banks, the NBFIs will also face a ban on collection of deposit for the time being in case of failure to deposit the premium on the deposits of clients, according to the draft.

A trustee board, to be comprised of BB board of directors, may recommend the central bank for winding up a bank or NBFI, if it fails to pay two or more premiums at a stretch.  

According to the law, the banks and the NBFIs will have to bring the deposits of their clients under insurance coverage with the central bank's Deposit Protection Trust Fund.

BB, however, will determine the portion of deposit for the insurance coverage and the rate of premium through official gazette from time to time.

Like the existing act, a depositor will get up to Tk 1,00,000 from the fund under the proposed law, if a bank or NBFI winds up.

"Whatever deposit a depositor has in one or more accounts, s/he will only get Tk 1,00,000 after winding up," a section in the draft said.

Officials of the central bank said the draft will be finalised after incorporating feedbacks of the stakeholders concerned. Then it will be sent to the Ministry of Finance for taking next steps, including approval of the cabinet and the parliament.

Currently, there are 57 scheduled banks and 34 NBFIs operating in the country.

The amount of deposit with the banks reached Tk 9.26 trillion and that with NBFIs Tk 418.85 billion until last December.

On the other hand, the volume of Deposit Insurance Trust Fund stood at Tk 60.10 billion up to June 2017.

Currently, the banks have to pay premium at the rate ranging from 0.08 per cent to 0.10 per cent on the portion of deposits, which come under insurance purview.

The new draft does not fix any rate of premium, saying that the central bank will announce the rate from time to time.

bdsmile@gmail.com

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