The new draft of “Deposit Protection Ordinance, 2025” has the provision for only Tk 2 lakhs to be returned to a customer in the event of a bank going under or liquidating.
This means one will receive a maximum of Tk2 lakh if that bank or NBFI is liquidated if the account has more than Tk2 lakh in one or more accounts in a bank or with a NBFI.
However, as per the draft, this limit will be reviewed every three years.
The ordinance, drafted by the Bangladesh Bank, was recently published by the Ministry of Finance on the website of the Financial Institutions Division.
The ministry has sought opinions from stakeholders on the ordinance.
To safeguard depositors' interests, the draft act also includes a clause that would subject banks and other non-bank financial institutions (NBFIs) to the deposit insurance ordinance.
This comes on the heels of Bangladesh Bank Governor Ahsan H Mansur saying the government might be unable to save some of the weak banks on February 25.
“We are trying to keep the banks alive with good governance. We may not be able to do it all. Not all banks will survive. The chances of some banks surviving are very slim,” he said.
The question of the depositor's protection was raised again after his remarks.
The Bank Deposit Insurance Act of 2000 provides depositors with insurance protection for their money if a scheduled bank goes out of business.
If the proposed law is approved, deposits made with banks and NBFIs will be covered by the Deposit Protection Ordinance 2025.
There are currently 57 scheduled banks and 34 NBFIs operating in the country.
According to the proposed law, the NBFIs will also face a ban on collection of deposits for the time being in case of failure to deposit the premium on the deposits of clients.
Banks currently have to pay premiums ranging from 0.08% to 0.10% on the portion of deposits that fall under the insurance purview.
The new draft does not fix any premium rate, saying that the central bank will announce the rate from time to time.
A trustee board, made with Bangladesh Bank board of directors, may recommend the closure of some banks or NBFIs 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 their clients' deposits under insurance coverage with the central bank's Deposit Protection Trust Fund.
Bangladesh Bank, however, will determine the portion of the deposit for the insurance coverage and the premium rate through the official gazette from time to time.
Under the ordinance, the central bank will establish a deposit protection fund maintained through a separate account.
The fund will comprise of initial, annual risk-based, and special premiums received from banks; penalties collected from member institutions; profits earned from investments; adjusted funds from liquidated banks; and other unconditional funds designated for payment.
Primarily, the fund will be used to pay secured deposits in the event of a bank's dissolution, though it may also provide financial assistance for bank resolution.
In the case of a fund deficit, the Bangladesh Bank will have the authority to collect special premiums from member institutions, seek unconditional financial assistance from the government or other sources, or secure government loans.
The central bank will also establish a separate fund for depositors of non-bank financial institutions.
According to the existing deposit insurance law, depositors are entitled to a maximum refund of Tk1 lakh in case of a bank liquidation.
Although the previous Awami League government took the initiative to amend it to Tk2 lakh, it was not implemented then.
If it is adopted by parliament, it would replace the existing Bank Deposit Insurance Act 2000.
