Kathmandu. In Nepal too, Deposit and Credit Guarantee Fund (CDC) has been operating security services to secure individual deposits held in banks and financial institutions.
Currently, a maximum of Rs 5 lakh is covered under the security net of deposits deposited in one bank of each person. Earlier, this limit was only Rs 2 lakh. Fiscal Year 2079. It has been fixed at Rs 80 lakh to Rs 5 lakh. Any fee for the security of savings is borne by the bank and not by the saver. Therefore, the saver does not have to pay a separate fee.
According to the latest details of the fund, deposits worth Rs 143 billion were secured by mid- and low-income customers. In addition to this, the fund has also been running a credit guarantee program.
According to the report of July 2081, loans worth Rs 258 billion have been secured. The fund, which is bearing such a huge financial risk, has not re-insured. It will be a challenge for the fund to bear the financial burden if more than one bank or financial institution is submerged at the same time for some reason.
In Nepal too, banks and financial institutions are likely to face crises from time to time or come under financial pressure. In recent times, the Nepal Rastra Bank (NRB) has adopted the strategy of forcibly merging commercial banks with another bank in a strong position instead of declaring them financially distressed. While this strategy may not cause immediate stress on the banking sector, in the long run, it could also damage the financial health of the merging banks.
For example, Prabhu Bank, which merged with Century Commercial Bank, suffered a loss of bad loans in the fiscal year 2079. It has not been able to distribute dividends since 80. On the other hand, the shareholders of Himalayan Bank, which merged with Civil Bank, have not received dividend for the last 3 years.
The security of the fund assures that even in such a situation, the money of small savers or middle-class depositors will be protected up to at least Rs 5 lakh. This has contributed to increasing public confidence in the banking system. Apart from this, keeping money in the bank is sure that it will not sink, so it has also encouraged the general public to make a habit of keeping money safe in banking institutions rather than keeping money at home.
Cooperative Savings Protection
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According to the National Federation for the Protection of Cooperative Savers, 357 cooperatives across the country have embezzled Rs 275 billion from their savers since 2079. The report prepared by the Parliamentary Special Committee on the Misuse of Savings in Cooperatives formed by the Government of Nepal has concluded that 40 big cooperatives having network in more than one district have embezzled Rs 87.89 billion.
According to the report, 40 cooperatives, including 22 problematic and 18 questions raised publicly, have liabilities of Rs 87.89 billion including savings of Rs 71.30 billion. The money of the common savers has not been returned as there is no provision to compulsorily insure the amount in the savings account of the cooperative.
