NDIC Raises Insurance Coverage For Depositors Of Failed DMBs, MfBs To N5m, N2m
BY CHINYERE OBIORA, LAGOS – The Nigeria Deposit Insurance Corporation (NDIC) has announced an upward review in the minimum insurance coverage for Deposit Money Banks (DMBs) and other financial institutions licensed by the Central Bank of Nigeria (CBN).
By this new development, the minimum deposit insurance coverage for failed DMBs has been raised from N500,000 to N5 million, providing full coverage of 98.98 per cent of the total depositors compared with the current cover of 89.20 per cent.
The Managing Director and Chief Executive of NDIC, Mr Bello Hassan, who announced the new coverage limits at a press conference, explained that the move is in line with the Corporation’s resolve to enhance depositors’ protection, public confidence, financial inclusion, and stability of the financial system.
Hassan said in terms of the value of deposit covered, the revised coverage would increase the value of deposits covered by deposit insurance to 25.37 percent from the current cover of 6.31 percent of total value of deposits in the event of banks’ failure
Similarly, he said the Microfinance Banks (MFBs) deposit insurance coverage has been raised from N200,000 to N2,000,000 and this would provide coverage of 99.27 per cent of the total depositors compared with the current level of 98.76 per cent and would increase the value of deposits covered by deposit insurance to 34.43 per cent against with 14.38 per cent of total value of deposit, currently covered.
Also for Primary Mortgage Banks (PMBs), the NDIC boss said maximum deposit insurance coverage also moved from N500,000 to N2,000,000, explaining that this would provide full coverage of 99.34 per cent of the total depositors compared with the current 97.98 per cent and would as well increase the value of deposits covered by deposit insurance to 21.04 per cent from 10.77 per cent of total value of deposit, currently covered.
On the part of Payment Service Banks (PSBs), Mr Hassan said the upward reviewed insurance cover goes from the current N500,000 to N2,000,000, adding that this would provide full coverage of 99.99 per cent of the total number of depositors and would increase the value of deposits covered by deposit insurance to 43.10 per cent of the total value deposits from the current cover of 40.60 per cent.
For subscribers of Mobile Money Operators (MMOs), the maximum deposit insurance coverage has now moved from N500,000 to N5,000,000 per subscriber, same as the applicable coverage level for depositors of DMBs.
He emphasized that the revised deposit insurance coverage has balanced the NDIC’s goals of deposit protection and financial system stability with incentives for depositors to practice market discipline and prevent banks from unnecessary risk-taking and moral hazard.
He said that consideration was given to ensure that the coverage was limited but adequate enough to protect a large number of depositors and credible enough to prevent the destabilizing effect of bank runs.
Bello, while reaffirming the NDIC’s unwavering commitment to protecting depositors and contributing to the stability of the financial system, said that; “These adjustments to the maximum deposit insurance coverage reflect our dedication to adapt and evolve in response to the changing landscape of the financial industry, and we remain steadfast in our pursuit of a secure and resilient banking environment for all.”
Meanwhile, the NDIC’s mandate of Deposit Guarantee is a critical component of depositors’ protection, as it guarantees the payment of deposits up to a maximum set limit in the event of bank failure.
This deposit guarantee covers customers of all deposits taking financial institutions licensed by the Central Bank of Nigeria (CBN). These include Deposit Money Banks (DMBs), Microfinance Banks (MFBs), Primary Mortgage Banks (PMBs), Non-Interest Banks (NIBs), Payment Service Banks (PSBs) and subscribers of Mobile Money Operators.
According to the NDIC, the maximum deposit insurance coverage is determined through periodic research based studies, to ensure its adequacy and credibility and various factors considered in setting the coverage level are; deposit distribution, impact of inflation, per capita GDP, exchange rate and other statistical models, among others.
This guarantee by the government ensures that account holders’ funds in an insured bank are safe and secured up to a certain amount.
