NDIC – Protecting Your Bank Deposits 

NDIC – Protecting Your Bank Deposits 

NDIC

Every day we deposit money into the bank either physically or through the bank’s digital channels. But have you ever wondered, “what happens to my money if the bank was to get into trouble”? well that is what the NDIC is for.  

They insure depositor’s funds. They help to make sure you can get back your money if your bank was to fail today. This article aims to shed more light on the NDIC, explain the role it plays in maintaining the stability of the financial system and look at its current operating structure. 

What is the NDIC and why was it created? 

The NDIC stands for the National depositor’s insurance corporation, it is a parastatal under the ministry of finance. Its history dates to 1988 when it was created through the enactment of the NDIC Act. The primary purpose was to address the need for a deposit insurance system that would protect depositors’ funds in the event of a bank failure. 

Objectives of the NDIC in Nigeria? 

Below are the responsibilities of the NDIC: 

Deposit Insurance: The NDIC’s main role is to ensure that your money in the bank is safe. They promise to pay you back a portion of your savings (usually up to a certain limit) if the bank ever faces financial trouble. This means you can have confidence that your hard-earned money is protected. 

Bank Oversight: The NDIC keeps a close watch on banks. They regularly check how well these banks are doing financially. It’s like a financial health check to spot problems early. 

Assisting Troubled Banks: If a bank gets into financial trouble, the NDIC in conjunction with the CBN steps in to help. They might merge it with another bank, manage it temporarily, or close it down in an organized way. The goal is to make sure your money is safe and to prevent disruptions in the banking system. 

Risk Management: NDIC is all about reducing risks. They run tests and checks to identify any threats to the banking system and take steps to prevent them from causing problems. 

Are all my funds insured by the NDIC? 

No, not all funds are insured by the Nigerian Deposit Insurance Corporation (NDIC). The NDIC provides deposit insurance coverage for certain types of funds up to specified limits. 

Here’s what you need to know: 

1. Insured Deposits: The NDIC insures eligible deposits held in licensed banks and financial institutions in Nigeria. This includes funds held in savings accounts, current accounts, fixed deposits, and other deposit accounts. 

2. Coverage Limit: The deposit insurance coverage has a specified limit. Currently, the coverage limit is set at 500,000 Naira per depositor per bank. This means that if you have multiple accounts in the same bank, the total coverage is up to 500,000 Naira. Anything beyond that will not be covered, and you stand to lose that amount if there were to be a bank failure. 

3. Exclusions: Some funds and accounts are not eligible for NDIC insurance. Examples of excluded accounts include 

  • Development Finance Institutions such as Bank of Industry, Federal Mortgage Bank, Bank of Agriculture, and Infrastructure Bank 
  • Discount Houses 
  • Finance Companies 
  • Investment Firms 
  • Unit Trusts/Mutual Funds 
  • Insurance Companies 
  • Pension Fund Administrators (PFAs) 
  • Stockbroking Firms 

Deposits of staff, including directors of the insured institutions, and deposits held as collateral for loans are also not covered by the NDIC. 

It’s crucial for depositors to be aware of the coverage limits and exclusions. If you have deposits exceeding the coverage limit or hold funds in accounts that are not eligible for NDIC insurance, you should consider diversifying your deposits among different banks or financial institutions to ensure your savings are adequately protected. 

Does the NDIC insure deposits of non-Nigerians?

Yes, the NDIC insures bank deposits of natural persons as well as legal entities, whether they are from Nigeria or from any other country but resident in Nigeria. 

Are my deposits in OPAY and other neo-banks insured by the NDIC?

Yes, all deposit money banks licensed by the CBN are under the NDIC’s coverage. OPAY, Kuda and other new-generation banks fall into this category, thus your deposit of up to 500,000 is insured by the NDIC. 

How can I claim my money if a bank fails? 

Below is a guide for depositors of closed banks to file claims on the failed corporation 

Individual depositors

• Download the Depositors Verification Form (CRD VF1) 

• Fill in the following required fields: 

  1. Name of the closed bank 
  2. Depositor’s name 
  3. Depositor’s signature 
  4. Depositor’s current contact address 
  5. Type of deposit account 
  6. E-mail address (if any) 
  7. Mobile phone number 
  8. Current bank account details 

• Attach one recent passport-sized photograph 

• Fill the checklist form, sign, and date it 

• Attach a proof of deposit (passbook, Cheque book, term deposit certificate, statement of account, etc.) 

• Attach a valid means of identification (Driver’s License, International Passport, National Identity Card, NIN Slip/Card, Voter’s card, or written identification by a traditional ruler or Local Government Chairman) 

Companies

• In addition to requirements for individual depositors: 

  1. Company seal must be affixed on the forms 
  2. All signatories must sign the forms 
  3. Recent passport photographs of all signatories must be attached 
  4. Attach copy of Certificate of Incorporation 
  5. Attach a letter of authorization/introduction of signatories 
  6. Attach copies of valid means of identification and official identity cards of the signatories 

Government Agencies 

• In addition to requirements for individual depositors: 

  1. All signatories must sign the forms 
  2. Recent passport photographs of all signatories must be attached 
  3. Attach letters of authorization/introduction of signatories 
  4. Attach copies of valid means of identification and official identity cards of the signatories 

Registered Firms & Partnerships

• In addition to requirements for individual depositors: 

  1. All authorized persons must sign the forms 
  2. Recent passport photographs of all authorized persons must be attached 
  3. Partners’ resolution in respect of persons authorized to file claim on behalf of the firm 
  4. Attach copies of valid means of identification and official identity cards of the authorized persons

Sole Propprietorships

• In addition to requirements for individual depositors: 

  1. Attach Certificate of Registration 

Registered Associations 

• In addition to requirements for individual 

  1. Depositors: List of trustees 
  2. All authorized persons must sign the forms 
  3. Recent passport photographs of all authorized persons must be attached 
  4. Resolution in respect of persons authorized to file claim on behalf of the association/club 
  5. Attach copies of valid means of identification of the authorized persons 

Claim on Behalf of a Deceased Depositor 

• The claimant shall provide: 

  1. A Proved Will/Letter of Administration or an Order from a court of law administering the estate of the deceased 
  2. The death certificate of the deceased 
  3. The Administrators/Executors of the estate shall sign the forms and affix their passport photographs 
  4. The Administrators/Executors of the estate shall provide their valid means of identification 

The Bottom Line? 

In essence, the Nigerian Deposit Insurance Corporation (NDIC) is the guardian of your savings in Nigeria’s banking sector. It ensures your money is safe by offering deposit insurance coverage, regularly checking banks’ financial health, and stepping in to resolve issues when banks face distress. NDIC’s mission is to protect depositors and maintain the stability of the financial system, promoting confidence and security in Nigeria’s banking industry. Remember, your deposits are covered up to a certain limit, so you can bank with peace of mind. 

FAQs 

What is deposit insurance?

Deposit Insurance is a financial guarantee instituted as a measure of safety for the financial system to protect depositors. Deposit Insurance ensures that the depositor does not lose all his money in the event of failure of an insured institution.

How Does it Work? 

NDIC manages three deposit insurance funds, DIF for Universal banks, NIDIF for noninterest banks, and SIIF for licensed Microfinance Banks and Primary Mortgage Institutions. Universal bank deposits are covered by the Deposit Insurance Fund (DIF), Non-interest bank deposits are covered by the Non-Interest Deposit Insurance Fund (NIDIF) while Microfinance banks and Primary Mortgage Institutions’ deposits are covered by Special Institutions Insurance Fund (SIIF). The rules governing the insurance of the deposits of banks and other institutions insured by DIF, NIDIF, and SIIF are the same. The depositors of licensed MFBs & PMIs will therefore be protected if the annual premiums are paid to the Corporation.

Why Do We Need Deposit Insurance

Deposit Insurance provides two important benefits to the economy: 

1. It assures small depositors that their deposits are safe and that a guaranteed sum will be immediately available to them if their insured institution fails. 

2. It maintains public confidence in the banking system, thus fostering economic stability and growth. Without the confidence of both the operators and the public in the banking system, banks would avoid lending money by keeping depositors’ money on hand and in cash at all times. 

Are All Financial Institutions Insured By NDIC?

No. The NDIC insures deposits in all deposit-taking financial institutions licensed by the Central Bank of Nigeria such as Universal Banks, Microfinance Banks, noninterest Banks, and Primary Mortgage Institutions. 

How Does the NDIC Protect Depositors of MFBs And PMIs Against Loss?

Each insured Microfinance Bank and Primary Mortgage Institution must meet high standards of safety and soundness in its banking practices. Adherence to these standards is determined through regular routine and special examinations by the Regulatory Authorities: the CBN and the NDIC. If despite these precautions, an insured MFB/PMI gets into financial difficulties and must be closed for the purpose of liquidation. The NDIC will be on hand with cash to relieve a depositor up to the maximum of N200,000 for MFBs and N500,000 for PMIs.

Why Are Directors and Staff Deposits Not Covered by The DIS While Deposits of Shareholders Are Covered?

Directors and staff deposits are not covered to create an incentive for them to manage their institutions in a safe and sound manner and also to ensure good corporate governance practices. On the other hand, deposits of shareholders are covered since they are not involved in the day-to-day running of their institutions. 

Is it mandatory for all licensed banks to insure their total deposits with the NDIC? 

Yes, it is necessary for all MFBs, and deposit money banks to insure their customer deposits with the NDIC. 

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