Study seeks to review up depositors' guaranteed cash in collapsed banks
News
By
Paul Wafula
| Jun 17, 2016
Kenya Deposit Insurance Corporation (KDIC), the banking sector insurer, is conducting a study that could see it increase the maximum guaranteed amount for depositors from the current Sh100,000.
The institutions acting chief executive Mohamud Mohamud, however, reckoned that the study will review coverage and the premiums before making such a decision.
“There is an ongoing study to review coverage, target fund and Risk Based Premium to inform on way forward,” Mahamud said Thursday.
Currently, the board is mandated to provide deposit insurance coverage of up to Sh100,000 to each depositor of a member institution. A deposit insurance scheme is a financial guarantee to protect depositors’ cash in the event a bank collapses. The insurance covers all types of deposit accounts.
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However, protected payment is restricted to one depositor per institution.
Where a depositor has more than one account in an institution, the accounts are consolidated for settlement as one claim subject to the maximum protected limit of Sh100,000. This limit has come been criticised in the recent past for being too little and out of touch with the majority of the depositors.
But Mr Mahamud said an increase on the limit may also lead to a rise in premiums. The law prescribes a maximum of 0.4 per cent of the average of a member’s total deposit.
The current annual premium is assessed at 0.15 per cent, with institutions requiring remitting premiums within 21 days from the date of receipt of the assessment notice. Late payments are subjected to penalties.
The agency invests the funds is in Government paper --Treasury Bills and Bonds that are seen to guarantee maximum returns at a minimum risk. By March this year, the Fund had a Sh62 billion balance while total deposits stood at Sh2.6 trillion.
KDIC is also allowed a borrowing from CBK of up to 25 per cent of its Fund size. With the recent turbulence in the banking sector, the agency has come under intense pressure from the public.
It was forced to borrow some money to take care of the Chase Bank receivership process.
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