The Central Bank is to introduce a novel Deposit Insurance Scheme to protect 13 million small scale depositors with deposit of 200,000 rupees or less at licensed and registered commercial banks and registered financial institutions. It will be effective from the 1st of next month.
Central Bank Governor Ajith Nivard Cabraal said some 23 Commercial banks, 09 specialized banks and 36 finance companies will come under this Scheme. Deposits under 200,000 rupees will be insured to ensure the repayment of deposits in an event of the bank or the finance company collapsing. He said the Central Bank repay only for savings deposited at registered or licensed finance companies and banks as they are considered legitimately established financial institutions. Sri Lanka did not have a scheme of this nature up to now and this they expect will boost private savings among the public. The Central Bank Governor emphasised that Sri Lanka expects to raise the rate of deposits to a minimum 30% of the GDP from current 18% in the next six years in order to realize their development goals.
The Deposit Insurance Scheme expects to protect the interest of small depositors from the failure of financial institutions and thereby to contribute to the financial system stability. Ajith Nivard Cabral said the Scheme is one of the safety net instruments for both crisis prevention and crisis management. He stressed it promotes financial system stability which is a core objective of the Central bank.