Bank depositors will from today access up to half a million shillings of their deposits in the event of a bank’s failure.
This is after the Kenya Deposit Insurance Corporation (KDIC) revised the deposit insurance coverage from Sh100,000, offering huge relief to savers who have struggled to retrieve their cash from failed banks.
This was one of the three-point economic stimuli announced yesterday by KDIC boss Mahmoud Mahmoud who said the move will see 99 per cent of in the country depositors fully covered.
”Our mandate is to monitor and ensure zero bank failure. However, in case of that happens, depositors will immediately have access to Sh500,000, the second-highest coverage limit in Africa after Morocco,’’ Mahmoud said.
The new limit translates into a more than double increase in the deposits insured by KDIC, from eight per cent to 20 per cent that has been in place since 1989.
Kenyans have in the past decade three bank failures, including Dubai Bank, Chase Bank and Imperial Bank, which saw most of the depositors’ funds, locked for years pending liquidation.
According to Mahmoud, the new coverage limit will now see KDIC’s risk exposure almost triple to Sh658 billion from Sh294 billion.
The depositors’ agency has also given banks a six-month grace period to pay annual premiums of 0.15 per cent of deposits or Sh300,000, whichever is higher to cushion the banking sector against negative effects of coronavirus.
Banks are supposed to pay deposit premium in July but the agency has extended the payment deadline by another six months to December 31 after lenders were forced to restructure close to Sh678 billion after Central Bank of Kenya (CBK) pleaded payment leniency for borrowers.
Besides, the statutory deposit underwriter has shelved plans to let banks pay annual premiums based on risk levels by another year.
In May, KDIC had announced plans to roll out the risk-based premiums on July 1 (today).
It had urged that the current flat-rate premiums are a moral hazard, hence the need to punish lenders with higher risk and reward prudent bankers with cheaper insurance premiums.
Yesterday, KDIC boss said the current Covid-19 may have impacted on banks’ cash flows, hence altering their actual risks.
‘’In support of our member institutions during these unprecedented times, the corporation has postponed the implementation of the model by 12 months to allow them to recover from effects,’’ Mahmoud said.
He assured depositors that the banking system was safe and commended lenders for maintaining high standards even in the face of uncertainties.