New Law to Fully Protect 93 pc of Bank Depositors

The government has approved a landmark amendment to the Deposit Protection Act, expanding financial safety coverage for millions of account holders across the country. The revised law proposes to increase the insured deposit limit from Tk 1 lakh to Tk 2 lakh, ensuring that 93 percent of all bank depositors in Bangladesh will now enjoy full protection of their savings.

The amendment, endorsed at a recent Advisory Council meeting chaired by the Chief Adviser, aims to strengthen public confidence in the financial system and align Bangladesh’s deposit insurance framework with global standards.

Key features of the new law

Under the new provision, non-bank financial institutions (NBFIs) will, for the first time, be brought under the deposit protection scheme. However, this protection will take effect from July 2028, allowing the institutions time to prepare and comply with the new regulatory structure.

Separate Deposit Protection Funds will be established for banks and NBFIs. These funds will be used to safeguard depositors’ money, ensure quicker payouts during financial crises, and support mergers of weak institutions.

According to the amendment, the payout period for protected deposits will be reduced from 180 days to just 17 working days, enabling depositors to access their insured funds much faster in case of a bank failure.

Coverage for both banks and NBFIs

While bank depositors already enjoy partial coverage under the Bank Deposit Insurance Act 2000, NBFI customers currently have no such protection. The amendment will change this scenario by creating a parallel protection mechanism for the country’s 35 NBFIs.

Each NBFI will contribute 0.5 percent of its paid-up capital to the protection fund by July 2028, and the contribution rate will vary according to the risk level of each institution.

Together, these NBFIs hold about Tk 50,000 crore in deposits across 4.8 lakh accounts, with an average deposit size of Tk 10.36 lakh. However, 21 of them are in poor financial health, and nine are already under consideration for liquidation, according to central bank data.

Safeguarding public confidence

Once enacted, the revised law will replace the existing Bank Deposit Insurance Act 2000 and introduce a more robust and transparent protection system. The new framework will be overseen by a Deposit Protection Authority (DPA), operating under the Bangladesh Bank.

The DPA will supervise all insurance activities and manage two separate protection funds — one for banks and another for NBFIs. Each fund will have an independent board, ensuring accountability and preventing any transfer of resources between sectors.

Banks and NBFIs will be required to submit lists of insured deposits to the DPA. In case of closure, the central bank will notify affected depositors directly, and payouts will be made under a unified depositor profile, covering all accounts held by the same individual.

A milestone for financial stability

Officials say that with the revised law, the government seeks to boost public trust, strengthen deposit safety, and create a more resilient financial system capable of managing shocks in both banking and non-banking sectors.

As of June this year, total deposits in Bangladesh’s banking sector stood at around Tk 20 lakh crore, reflecting a 9 percent increase year-on-year, while the total number of accounts rose to 16.9 crore, up from 15.84 crore a year earlier.

Once implemented, the new law will ensure that small depositors — who make up the vast majority of the country’s banking population — are fully protected against potential losses, marking a major milestone in Bangladesh’s financial reform journey.