Nepal’s Ministry of Finance has prepared a draft amendment to the Deposit and Credit Guarantee Fund Act, 2073 and invited public feedback within 10 days of the notice. The proposal seeks to broaden the country’s deposit and credit protection system, particularly by bringing savings and credit cooperatives licensed by the National Cooperative Regulatory Authority within the guarantee framework. The ministry says the changes are intended to address depositor concerns and strengthen confidence in the banking, financial and cooperative sectors.
One of the biggest changes would allow the fund to support depositors before an institution reaches liquidation or cancellation. If Nepal Rastra Bank takes over a troubled bank or financial institution and determines that depositors need immediate repayment, the fund could provide money up to the amount of protected deposits. A similar mechanism is proposed for troubled cooperatives taken under government management following a Cabinet decision. The ministry estimates that the amendment could initially require up to Rs 2 billion in additional cash outflow, although much of that amount could later be recovered.
The bill also proposes increasing the Deposit and Credit Guarantee Fund’s capital to Rs 10 billion and introducing risk-based annual protection fees, allowing different rates for banks, financial institutions and cooperatives depending on their risk levels. Cooperatives seeking protected status would have to make an initial contribution equal to 1 percent of total share capital, while banks and financial institutions would contribute 0.5 percent of proposed paid-up capital.
The amendment further proposes four separate funds covering bank deposits, bank credit, cooperative deposits and cooperative credit, with each maintained independently. It also mandates closer coordination and information sharing between the Deposit and Credit Guarantee Fund and the National Cooperative Regulatory Authority, including early communication when risks emerge in the cooperative sector. A lot of legal plumbing, certainly, but in this case the plumbing determines whether depositors get their money back.
