Banks credit and debit cards will soon bear stickers of Kenya Deposit Insurance Corporation (KDIC) as a mark of sound financial health as the liquidator seeks to ensure zero bank failure.
In an exclusive interview with the Star Newspaper, KDIC boss Mohamud Mohamud said the corporation in partnership with banking Central Bank of Kenya is monitoring daily activities of banks and that the symbol will act as a mark of compliance.
”We are planning to have banking halls and cards to bear KDIC logos to guide depositors on lenders we are working with. It will be a mark of of confidence both for depositors and banks,” Mohamud said.
He hailed banks for sound management that have seen them survive Covid-19 economic pressures.
”Sound management of depositors’ funds during the tough period earned lenders customer confidence, with the level of deposits growing 14 per cent and overall growth in total assets,”Mohamud said.
Mohamud’s tenor at the Old Mutual headquartered state department was last year extended to 2023, coinciding with the firm’s 2018-23 strategic plan that is changing its mandate from a liquidator to a risk minimizer.
Last year, KDIC hit several milestones including increasing depositors’ coverage limit in case of bank failure from Sh100,000 to Sh500,000, highest in Sub Saharan Africa.
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.
While he considers this as one of key achievements in 2020, Mohamud is not contended.
”My vision is to never witness another bank failure in this country. I want depositors to sleep at night knowing that their money is safe and that they can access anytime they feel like,” he said.
According to Mahamud, the new coverage limit will now see KDIC’s risk exposure almost triple to Sh658 billion from Sh294 billion.
The corporation also successfully lobbied for risk based premiums for banks to replace a flat-rate premium of 0.15 per cent of deposits or Sh300,000.
KDIC argues 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.
The new rates which were to take effect on July 1 last year were, however, postponed to give lenders a breathing room as part of Covid-19 relief measure.
Banks are traditionally required to pay the annual deposit insurance premiums in July of every year, but with the extended deadline, the payments will now be due on December 31, 2021.
Last year, KDIC also championed for the plight of Chess Bank and Imperial Bank depositors who finally received sizable chunk of money held when those two institutions were placed under receivership.
Mohamud, a deposit insurance assessor of international best practice, a title he only shares on the continent with his counterpart in Zimbabwe has much in store for depositors this year.
”We have so far implemented 70 per cent of our strategic plan. This year, we want to intensified reach out sessions for depositors and banks to remind them of their rights and responsibilities,” Mohamud said.
The agency also want to go big on capacity building across the continent, given that it is among few successful in the region.