Economy, Business And Markets

IDGF Guarantee of Deposits Reaches $32,000

IDGF Guarantee of Deposits Reaches $32,000IDGF Guarantee of Deposits Reaches $32,000

The amount of deposits held by Iran Deposit Guarantee Fund (IDGF) has multiplied and a new ceiling has been devised for the guarantee of deposits, announced the fund’s executive deputy.

“For all customers in every bank, a ceiling of one billion rials ($32,000 at market exchange rate) has been devised to guarantee deposits,” Morteza Setak was quoted as saying by Fars News Agency.

Setak noted that IDGF was formed on the basis of Article 95 of Fifth Five-Year Development Plan (2011-16), adding that it is a non-government public institution formed with the goal of guaranteeing that the deposits made in banks and credit institutions will be repaid in case of a banking crisis.

He added that the fund is run on the strength of membership fees.

“As per the law, all banks and credit institutions are obliged to become a member of the fund and the amount of membership fees will be collected in accordance with Article 95,” he said.

The statute pertaining to the fund has been amended a few times and was communicated on May 20. Regulations related to the amount and method of receiving membership funds were also reviewed several times, the latest of which dates back to 2015.

As to how much the fund has managed to amass in terms of deposits since its inception, Setak explained that the fund receives three kinds of membership fees.

“The first kind is a preliminary membership, based on which 2% of the capital for starting a bank must be deposited with IDGF. Therefore, all banks must pay at least 80 billion rials ($2.5 million) in membership to IDGF. The other membership fee is annual, the amount of which equals 0.25% of the average deposits per day, after the reserve requirement has been deducted,” he said.

The special membership fee is the third kind received by the fund, the amount of which is calculated proportional to the bank’s risk factor.

“The rate for this kind of membership fee is set in accordance with the bank’s level of risk,” he said.

The IDGF’s executive deputy said the fund has so far raised 7 trillion rials ($223.8 million at market exchange rate) worth of deposits, 2 trillion rials ($63.9 million) of which are in cash while about 5 trillion rials ($159.9 million) are in the form of guaranteed bonds.

“Although it must be said that the resources of the fund have not been derived only from membership, the interest gained from investments have also contributed to it,” he said.  

Protecting the savings of small depositors against losses caused by bankruptcy of banks and credit institutions is one of the mechanisms to promote the stability of the banking system, which is done by the creation of deposit guarantee/insurance fund.

Deposit insurance fund is one of the complementary elements of financial security network of each country. Other elements of this network include bank rules and regulations, banking supervision system and the central bank as the last supplier.

Most of the countries consider the deposit insurance system as the most important and essential way of dealing with financial crisis.