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

Finance Minister AHM Mustafa Kamal placed the Bill and it was sent to the respective scrutiny committee for further examination. The committee was asked to submit its report within one month.

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As per the current law, a depositor gets the highest Tk 1 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 1 lakh to Tk 2 lakh.

In Bangladesh, deposit insurance was introduced in August, 1984, while the amount of insurance coverage was Tk 60,000 which was later extended to Tk 1 lakh.

Only banks were mentioned in the previous act, while in the proposed law, financial institutions have been newly included extending the limit for depositors of financial organisations.

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.”

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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.

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After the order of liquidation of banks and financial organisations, the Bangladesh Bank will have to pay insurance money or Tk 2 lakh highest to the depositors from the Deposit Safety Trust Fund.

Each depositor will get the same amount of repayment 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.

All scheduled banks or commercial banks including the branches of foreign banks functioning in Bangladesh are insured by the Deposit Insurance Systems.