Main features of the Deposit Protection Bill 2020 | The Daily Star
12:00 AM, March 17, 2020 / LAST MODIFIED: 08:16 AM, March 17, 2020

Law Analysis

Main features of the Deposit Protection Bill 2020

Repealing the Bank Deposit Insurance Ordinance 1984 with certain modifications, the Bank Deposit Insurance Act, 2000 was enacted. Recently in February, 2020, a new law titled as the "Deposit Protection Bill" has been proposed in order to repeal as well as reenact the 2000 Act and to bring modifications thereto.

According to section 3 of the proposed law, Bangladesh Bank (BB) shall reserve a fund called Deposit Insurance Trust Fund (DITF) and the money of this fund shall be invested in any sector sanctioned by the BB. 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 sub-section 3 of section 3, the fund shall not be spent out except for payment of debt to the depositor creditor of the bank wound up under section 7 and for maintenance of this fund. Sub-section 4 provides that nothing of the Income Tax Ordinance shall be applicable to the income of this fund. Section 3 of the newly proposed law is identical to that of the previous Act of 2000 except for sub-section 5 thereto. Sub-section 5 says that no criminal proceeding shall be started against any authorised person for acts done in good faith under this law or any rules made thereunder.

Section 4 says that notwithstanding anything contained in any other law, all scheduled banks and financial institutions shall be considered to be insured from the date of the commencement of this law. And moreover, all scheduled banks and financial institutions established after the enactment of this law, shall be insured with the fund under this law.

There is a change sought to be brought through the proposed law in terms of premium of the insured banks and financial institutions. Section 5 of the Act of 2000 provided that every insured bank shall pay fund premium every year from that part of its deposit at the rate of 7 paisa per-cent which shall be determined by the BB from time to time. Section 5 of the proposed law says that every insured bank and financial institution shall pay fund premium on such part of the deposited amount and at such rate as may be determined by the BB from time to time.  Both the laws provided that BB may with the authority from the government change the rate of the premium.

Sub-sections 2, 3 and 4 of section 5 are almost identical to those of the previous Act. They say that the insured banks and financial institutions shall pay their premium from their expenditure; premium shall be paid in the time and manner as specified by the BB; if any insured bank fails to pay premium, the BB shall be able to order that premium be paid from the account of such insured bank and financial institution reserved by BB (by deducing an amount equal to that of the payable premium).

Section 6 of the proposed law provides that if an insured bank or financial institution fails to pay premium, then BB may order deduction of an amount from the account maintained by BB of such insured bank or financial institution equal to the premium, as premium. It further says that if an insured bank or financial institution fails to pay premium for two consecutive times, BB may order such bank or institution not to accept deposits for such time as may be in the notification of the official gazette, upon providing them the chance to be heard. The previous Act envisioned this consequence in case the insured bank failed to pay premium more than once. Section 6 of the proposed law further says that in case of failure of paying premium for two or more times, the Trustee Board may advise BB to take initiatives for the winding up of the respective institution.

Section 7 speaks about the liability of the fund.  If any order of winding up of an insured bank or financial institution is given, every depositor of such bank shall be paid an amount equal to his deposit by the BB, which shall in no case be more than one lakh taka. Sub-section 2 says that even if a depositor maintains more than one account and the sum of such account(s) is more than one lakh taka, he shall not be paid up from the fund exceeding one lakh taka or exceeding such amount as may be determined by the BB upon prior approval of the Government. There is a subtle difference between section 7 of the newly proposed law and that of the previous Act. The Act of 2000 provided that in all cases, the upper limit of payable amount shall be one lakh taka. However, the draft law says that with the prior approval of the Government, BB may also determine the payable amount differently. Section 7 also states that such paid up amount shall be adjusted with the amount paid to the depositor from its fund by the liquidator against the net asset of the bank. Sub-section 3 of section 7 says that the liquidator of any wound-up insured bank or financial institution, shall submit and send list of depositors in the form specified by the BB within 90 days after receiving office. Sub-section 4 says that as per provision of sub-section 3 after receiving the list of depositors the trustee board shall take initiatives to pay the payable amount to the depositors from the fund.

Section 8 provides that for the maintenance and management of the fund, there shall be a Trustee Board and the Board of Directors of the BB shall be the Trustee Board of the fund.

From Law Desk.

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