Introduction

Financial stability is one of the topical issues that has been accorded increased attention from central bank, government, market players, borrowers and deposit insurer. As a deposit insurer, Deposit and Credit Guarantee Fund(DCGF) has started the deposit guarantee scheme in Nepal from the year 2010. Deposit guarantee/insurance is recognized globally as an important component of a country's financial safety net and has been implemented in more than 120 countries around the world. It is a system that protects depositors against the loss of their guaranteed deposits placed with banks and financial institutions (BFIs) in the case of unlikely event of the BFIs failure. DCGF has given the statutory responsibility to perform both the deposit guarantee and credit guarantee function through it's own "Deposit and Credit Guarantee Fund Act, 2073". In the DCGF Board there has been representation of six from the government and one from Nepal Rastra Bank. Obviously, DCGF is a government sponsored and administered separate entity. Generally, deposit guarantee system is a government sponsored scheme.

In Nepal, deposit guarantee scheme is confined to BFIs namely

• Commercial Banks
• Development Banks
• Finance Companies and
• Micro Finance Institutions

DCGF has fixed the premium rate of 0.16 % on guaranteed deposit to all BFIs member institutions. The coverage of deposit guarantee is limited to Rs 5,00,000 per natural individual depositors per member institution applicable on a combination of saving and fixed deposit.