The Nigerian Insurance Deposit Corporation (NDIC) on Thursday raised the maximum deposit insurance coverage for Deposit Money Banks from N500,000 to N5 million, to enhance depositors’ protection and public confidence.
The Managing Director of NDIC, Mr Hassan Bello who made the announcement during a press conference in Abuja said the move is also in line with the Corporation’s commitment to achieve financial inclusion, and stability of the financial system.
Deposit insurance is the government’s guarantee that an account holder’s money at an insured bank is safe up to a certain amount.
For Primary Mortgage Banks (PMBs), he announced an increase of the maximum deposit insurance coverage from N500,000 to N2,000,000, adding this would provide full coverage of 99.34 per cent of the total depositors compared with the current 97.98 per cent.
He added that the move would increase the value of deposits covered by deposit insurance to 21.04 per cent compared with 10.77 per cent of total value of deposit, currently covered.
For Payment Service Banks (PSBs), the NDIC approved an increase of the maximum deposit insurance coverage from N500,000 to N2,000,000 and this would provide full coverage of 99.99 per cent of the total number of depositors.
It would also 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, the NDIC approved an increase of the maximum Pass-through deposit insurance coverage from N500,000 to N5,000,000 per subscriber per MMO as the applicable coverage level for depositors of DMBs.
“Findings indicate that high percentages of depositors ranging from 89.20% to 99.99% were fully insured under the maximum deposit insurance coverage levels across different bank categories (DMBs, PMBs, MFBs, and PSBs), meanwhile, a substantial portion of the total value of deposits, remain uninsured.
“We need to stress at this juncture that, high level of uninsured deposits posed a risk of bank runs. Indeed, the International Association of Deposit Insurers (IADI) Brief No. 9 of 2023 that examined the recent bank failures in the United States of America and Switzerland, concluded that, high levels of uninsured deposits in insured institutions might increase the likelihood of bank runs with dire impact on the stability of the financial system.
“Based on these considerations, and in line with our commitment to enhancing depositors’ protection, public confidence, financial nclusion, and stability of the financial system, I am pleased to announce that the NDIC’s Interim Management Committee (IMC), during its 18th meeting held on April 24th and 25th, approved an increase in the maximum deposit insurance coverage levels for all licensed deposit-taking financial institutions with immediate effect,” the NDIC boss stated.
Meanwhile, reacting to the development, Director of Capital Market Studies, Nasarawa State University, Keffi, Professor Uche Uwaleke said the action of the NDIC is a welcome development.
“The increase in the maximum deposit insurance coverage level from N500,000 to N5 million for DMBs and from N200,000 to N2million for Microfinance Banks is a welcome development against the backdrop of elevated inflation and naira depreciation.
“This would no doubt boost confidence in the nation’s banking sector as well as financial inclusion,” Prof. Uwadileke said.
