The Ministry of Finance has sought public feedback on a draft bill to amend the Deposit and Credit Guarantee Fund Act, 2073, giving stakeholders 10 days from publication of the notice to submit suggestions. The proposed amendment is aimed at updating the law, expanding deposit and credit protection, and addressing weaknesses exposed when banks, financial institutions or cooperatives become distressed. The ministry says the changes are also intended to strengthen public confidence in Nepal’s financial system.
A major provision would bring eligible savings and credit cooperatives licensed by the National Cooperative Regulatory Authority under the deposit protection framework. The draft also proposes raising the fund’s capital to Rs 10 billion and allowing different annual protection-fee rates based on the risk profile of banks, financial institutions and cooperatives. Cooperatives seeking protected-member 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.
Crucially, the bill would allow the fund to make advance payments before liquidation when a protected institution becomes problematic. If Nepal Rastra Bank takes over a troubled bank or financial institution, or the government assumes management of a troubled cooperative, the fund could provide money up to the amount of protected deposits to help return depositors’ funds immediately. The ministry estimates the amendment could initially require up to Rs 2 billion in additional cash outflow, though much of it could later be recovered if affected institutions return to operation.
The draft further proposes four separate protection funds for bank deposits, bank credit, cooperative deposits and cooperative credit, with their finances maintained independently. It also strengthens coordination between the Deposit and Credit Guarantee Fund and the National Cooperative Regulatory Authority through information sharing, regulatory cooperation and early warnings about emerging risks in the cooperative sector.
