If a bank fails in Bhutan and you have your money with that bank, can you get all your money back?
We know how people lose their savings whenever banks with which they kept their deposits collapse.
This happened during the collapse of Lehman Brothers of the US in 2008, and Henan Banks of China in 2022.
The ongoing cases of Silicon Valley Bank, First Republic Bank, and Credit Suisse are teaching us a lot.
If a bank in Bhutan also faces similar fate, whether you’ll get your money back is determined by the deposit insurance scheme of Bhutan.
Deposit Insurance – How Does it Work in Bhutan
In all the countries there must be a government agency who provides the deposit insurance to depositors of banks.
Some of such agencies are FDIC of the USA, SDIC of Singapore, DCGF of Nepal, and DICGC of India.
As per our Financial Services Act 2011, a deposit protection agency is to be instituted. But we don’t have one yet.
However, the Financial Protection Scheme Handbook mentions there is a unit under RMA – Bhutan Financial Protection Bureau, looking after this aspect.
How Much You Get Back when a Bank Collapsed
The standard insurance amount as per the deposit protection scheme of Bhutan is Nu.100,000.
All deposits maintained with banks will be protected up to the maximum limit of Nu.100,000 per depositor per bank.
Depositors can be individuals or institutions in this case. Let us consider different situations:
If one of the banks in Bhutan fails and you’ve your money with that bank, can you get all your money back?
It depends on your deposit amount and also types of your accounts with that bank. The deposit insurance in Bhutan is Nu.100,000.
How to Keep the Risk of Losing our Deposits Low
The deposit insurance scheme of Bhutan protects only up to Nu.100,000 per depositor per bank.
It makes sense to keep our money with different commercial and saving banks and also to spread across different investments.
When banks are into excess leverage in certain sectors and face liquidity shortage, no bank will be immune to a collapse.
If one or two banks in Bhutan gets a wake up call, it would be because of their excess loan exposure to tourism and housing sectors; contributing more than 40% to Bhutan’s total NPLs.
However, given Bhutan’s low exposure to international financial markets the probability is low though possibility is always there.
What do you think about the deposit insurance scheme of Bhutan? Is it too less? How you protect your deposits from such risks?
