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Depositors’ insurance payout raised to VND75 million
Thanh Thuong
Wednesday,  Jun 21, 2017,22:29 (GMT+7)

Depositors’ insurance payout raised to VND75 million

Thanh Thuong

HCMC – If a credit institution is declared bankrupt, the maximum insurance payable to a depositor for all deposits at an insured organization will be VND75 million (around US$3,300) from the current VND50 million under a new rule effective from August 5.

The amount of insurance paid for insured deposit amounts by the Deposit Insurance of Vietnam (DIV) includes both principals and interest for an individual at an insured organization, according to Decision No. 21/2017/QD-TTg recently issued by Prime Minister Nguyen Xuan Phuc.

The deposit insurance limit was set at VND30 million in 1999, but the figure was hiked to VND50 million in 2005.

A banking expert said the move is to keep up with the current demand. However, this insurance payout, albeit modest, will still increase the risk of the overstretched insurance fund when a certain bank is declared insolvent.

He said total assets of DIV were only VND30.6 trillion as of May 2016, with its reserve fund at VND23.2 trillion, which is far lower than overall assets of banks.

However, as no bank has been allowed to declare bankruptcy, he said, the amount of deposit insurance fund spent is thus too low.

In reality, according to the manager of a deposit insurance branch, his agency has spent a small fraction of its collected funds mainly on people’s credit funds.

He said the formal insolvency of a certain bank is even more unusual to come true, as it will have adverse effects on the country’s banking system. Meanwhile, ineffective banks have been undergoing restructuring, and so have been operating better.

The proceeds of the fund are often used to purchase Government bonds and Treasury bills, or are deposited at the State Treasury, and State-owned commercial banks.

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