Kenya Deposit Insurance Corporation extend coverage, grace period
Kenya Deposit Insurance Corporation (KDIC) has increased coverage limit in the likely event of bank failure and gave lenders a six month grace period to pay annual premiums.
KDIC chief executive officer, Mohamud Ahmed Mohamud, said the increased raft of measures are expected to cushion banks from the effects of Covid-19 pandemic.
“Banks have restructured loans worth Sh679 billion, so we want to support our members – the banks – as they extend these kind of initiatives to customers,” said Mohamud.
KIDC gave banks a six month grace period to pay annual premiums so that the deadline will be December 31st as opposed to July.
Ordinarily banks that fail to pay their premiums after the 21 day notice issued in July must pay a penalty for every additional day.
“As we told you last year, we are revising our deposit coverage from Sh100,000 to Sh500,000 effective midnight tonight.
This will increase the coverage level from the current 97 per cent to 99 per cent.
In the very unlikely event of a bank closure, we are able to pay 99 per cent of the depositors in full,” said Mohamud yesterday.
This means in case a bank collapses KDIC will cover up to Sh500,000 per depositor up from Sh100,000 previously.
“This translates into an increase in the insured deposits from the current Sh294 billion to Sh658 billion. That’s what we are supposed to pay in the very unlikely banking industry collapse” he added.
Currently, commercial banks pay 0.15 per cent of their deposits to KDIC as premium. Plans to shift to risk-based premiums as opposed to the current flat rate premium have been shelved and extended by one year to July next year.
“With the current Covid-19 pandemic, we might not get a true reflection of that particular bank. It will be erroneous for us to go estimate ratings,” he said.