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Financial stability is one of the topical issues that has been accorded increased attention by the central bank, government, market players, borrowers, and deposit insurers. As a deposit insurer, Deposit and Credit Guarantee Fund(DCGF) started the deposit guarantee scheme in Nepal from the year 2010. Deposit guarantee/insurance is recognized globally as an essential 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 an unlikely event of the BFI's failure. DCGF has been 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 a representation of six from the government and one from Nepal Rastra Bank. Obviously, DCGF is a government-sponsored and administered separate entity. Generally, a deposit guarantee system is a government-sponsored scheme.

In Nepal, the 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 deposits to all BFIs member institutions. The deposit guarantee coverage is limited to Rs 5,00,000 per individual natural depositor per member institution, which is applicable on a combination of saving and fixed deposits.