Closed Banks: Why NDIC insists on ₦5 million for depositors

Nigeria Deposit Insurance Corporation (NDIC) has insisted on paying a sum of ₦5,000,000.00 as maximum deposit insurance coverage (MDIC) for depositors of failed or closed banks in Nigeria.

Given the basis for the benchmark and other related matters, i.e. Heritage bank, at the Editor’s Forum 2024 held in Lagos during the weekend, Dr Kabir Kantata, Director and the Head of Policy Unit in the Research, Policy & International relations Department of the Nigeria Deposit Insurance Corporation (NDIC), Abuja, said the ₦5,000,000.00 benchmark covers nine depositors in every ten (98.8%).

In his paper titled, “The Path of NDIC Deposit Insurance Coverage: The Past, Present & Future”, Dr Kantata addressed some people’s agitations on the need to increase the MDIC, when he said, the Corporation does not have the financial muscle to pay uninsured deposits from the 1% insurance it collects from the banks.

He noted that the option of increasing the statutory 1% is a no go area as it is capable of posing serious financial threat to depositors, adding that, by limiting the MDIC to ₦5,000,000 only, the banking sector itself would always be mindful of its financial responsibility in case of any financial distress.

He however assured the remaining one (1) depositor in every ten (10) that “the Corporation is committed to ensuring that depositors with balances exceeding ₦5 million are also paid the balance of their deposits. . . , through liquidation dividends from the realisation of the defunct bank’s assets and recovery of debts.

He implored the general public to always be specific and detailed when filling out Bank Account Opening Forms so as to ensure seamless identification should there be any course for identity screening.

“I would like to seize this opportunity to emphasise the importance for depositors to ensure strict compliance with all Know Your Customer (KYC) regulations as prescribed by the CBN. This will not only promote hitch-free transactions with their banks, it will also go a long way in ensuring prompt reimbursement in the event of bank closure”.

Dr Kantata lamented challenges being faced by staff of NDIC in the course of carrying out their duties such as hostile environment, volume of works and inadequate resources, as well as litigation challenges.

The seasoned researcher hinted about varied innovations being introduced into the system to ensure timely and seamless payment of MDIC such as the use of NIN to facilitate the identifier process of depositors.

“Over the years, the NDIC has been instrumental to promoting stability by ensuring that when banks fail, depositors are protected, and their funds are reimbursed promptly.

“It is instructive that in the discharge of this critical role of depositor reimbursement, the Corporation began the payment of the insured deposits of ₦5 million per depositor within a record time of four days of the bank’s closure.

“This was achieved using Bank Verification Numbers (BVN) as a unique identifier to locate depositors’ alternate accounts in other banks without the need to fill forms or visits the NDIC offices.

Subsequently, in his remarks, the Managing Director and Chief Executive Officer of the Nigeria Deposit Insurance Corporation (NDIC), Mr. Bello Hassan, outlined several provisions that NDIC has in store as a form of shock absorber for any failing bank among which were loan accessibility, all in its bids to prevent total collapse of banks.