Bank Deposit Insurance Act, 2000
The Bank Deposit Insurance Act, 2000 was enacted to secure depositors’ interests and strengthen the stability of the banking system in Bangladesh. This legislation replaced the earlier Bank Deposit Insurance Ordinance, 1984 and introduced a structured deposit protection mechanism.
Key Features of the Act
- Mandatory Membership: All scheduled banks operating in Bangladesh are required to be members of the deposit insurance scheme.
- Coverage Limit: The Act initially offered coverage up to BDT 100,000 per depositor. Later revisions have proposed to increase the insured amount to BDT 200,000 per depositor.
- Deposit Insurance Trust Fund (DITF): Managed by Bangladesh Bank, DITF collects premiums from member banks and invests them in secure government instruments.
- Trustee Board: The Board of Directors of Bangladesh Bank acts as the trustee board of the fund and supervises its administration.
Objectives of the Deposit Insurance System
- Protect Small Depositors: Ensure security for the savings of small depositors in the case of bank insolvency.
- Boost Public Confidence: Promote trust in the financial system to encourage savings and banking transactions.
- Ensure Financial Stability: Help reduce the risk of bank runs by assuring deposit safety.
- Promote Economic Growth: A sound deposit insurance system contributes to greater economic stability and growth by increasing public participation in the banking system.
Recent Developments
In response to changing financial dynamics, the government proposed a new framework under the Deposit Protection Act, 2020, which aims to modernize and enhance the existing protection provided by the Bank Deposit Insurance Act, 2000.
Key aspects of the proposed changes include:
- Increased Coverage: The insurance coverage is proposed to be increased to BDT 200,000 per depositor.
- Timely Compensation: The new framework mandates compensation within a fixed time frame after bank liquidation.
- Periodic Review: The deposit coverage limit is to be reviewed and adjusted every three years to reflect economic conditions.
Legal References
You can read the full legal text here:
Conclusion
The Bank Deposit Insurance Act, 2000 plays a vital role in enhancing financial security and strengthening public confidence in the banking system of Bangladesh. By offering deposit protection and ensuring prompt compensation, it builds a robust framework for financial safety and trust in the country’s banking sector.
