NDIC enhances depositors’ protection, raises deposit insurance coverage for bank customers

In line with its commitment to enhancing depositors’ protection, public confidence, financial inclusion, and stability of the financial system, the Nigeria Deposit Insurance Corporation (NDIC) has announced a substantial increase in the maximum deposit insurance coverage levels across various banks.

At a press conference on Thursday, April 2^nd,  NDIC’s MD/CEO, Mr. Bello Hassan said effective immediately, said the  maximum deposit insurance coverage for deposit money banks has been elevated from N500,000 to N5,000,000.

This change will now fully cover 98.98 per cent of depositors, significantly up from the current 89.20 per cent.

Coverage for MFBs has risen from N200,000 to N2,000,000, aiming to protect 99.27 per cent of depositors, compared to 98.76 per cent under the previous limits, while coverage for Primary Mortgage Banks has been increased from N500,000 to N2,000,000, ensuring 99.34 per cent of depositors are fully covered, up from 97.98 per cent.

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Also, Payment Service Banks (PSBs) coverage has been adjusted from N500,000 to N2,000,000, covering nearly all depositors at 99.99 per cent, while

The pass-through deposit insurance for  Mobile Money Operators (MMO) subscribers has jumped to N5,000,000 per subscriber.

In his address, Mr. Hassan outlined the journey and rationale behind the adjustments in insurance coverage. Initially set at N50,000 in 1989 to cover 85% of depositors, the coverage was progressively increased to N200,000 in 2006, and later to N500,000 in 2011 for Deposit Money Banks (DMBs), with similar adjustments made for other financial institutions over the years.

Mr. Hassan emphasized that the revised coverage is a strategic balance between protecting depositors and ensuring the stability of the financial system. The changes aim to extend protection to a larger percentage of the population, enhance financial inclusion, and mitigate the potentially destabilizing effects of bank runs.

In the event of a financial institution’s failure and the revocation of its license by the Central Bank of Nigeria (CBN), the NDIC will reimburse eligible depositors up to the maximum insured amount of N5 million in Deposit Money Banks (DMBs) and N2 million in Microfinance Banks (MfBs) and Primary Mortgage Banks (PMBs).

The Corporation sells the assets of failed banks and collects debts owed to them so that depositors whose claims exceed the maximum insured sums can receive liquidation dividends on a pro-rata basis.

The new coverage levels are designed to fully insure a higher percentage of depositors. For instance, the coverage for DMBs now fully protects 98.98% of depositors, up from 89.20 per cent.

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This change means that almost all depositors are completely covered by the NDIC’s insurance, reducing their risk significantly in case their bank collapses.