Sri Lanka Deposit Insurance Scheme
Overview
Deposit insurance is a mechanism implemented in many countries to protect depositors of financial institutions, fully or partially, from losses caused to depositors due to the failure of financial institutions.
Accordingly, deposit insurance acts as a safety net mechanism and its importance was amply highlighted after the global financial crisis of 2007-2008. To date, deposit insurance has been established in more than 100 countries including Sri Lanka, Canada, France, India, Pakistan, Japan, Phillipines, Malaysia, South Korea and the United Kingdom etc.
History of the Deposit Insurance Scheme of Sri Lanka
| • | The Central Bank of Sri Lanka (CBSL) implemented a mandatory deposit insurance scheme under the enabling provisions of the Monetary Law Act No.58 of 1949, as the Sri Lanka Deposit Insurance Scheme with effect from 01.10.2010 under the Sri Lanka Deposit Insurance Scheme Regulations No. 1 of 2010. The name of the Sri Lanka Deposit Insurance Scheme was amended as the Sri Lanka Deposit Insurance and Liquidity Support Scheme based on subsequent amendments in year 2013. This scheme was implemented in the interest of overall financial system stability of the country, and it promoted a mechanism to protect depositors from failure of financial institutions and thereby to support the stability of financial institutions by maintaining depositor confidence. |
| • | With the enactment of the Banking (Special Provisions) Act, No. 17 of 2023, the Deposit Insurance Scheme of Sri Lanka was legally instituted and named as the Sri Lanka Deposit Insurance Scheme. |
The main purposes of establishing the Sri Lanka Deposit Insurance Scheme (SLDIS)
| • | Insuring the deposits made by depositors in financial institution which is a member of the Scheme (referred to as a “member institution”) in order to compensate such depositors up to a maximum amount as may be determined by CBSL from time to time, in the event the licence issued to such member institution is cancelled by CBSL; |
| • | Establishing a system for providing appropriate financial assistance to facilitate the transfer of assets and liabilities of a member institution as a resolution measure, subject to safeguards. |
Administration and Management of SLDIS
| • | CBSL shall be responsible for the administration and management of SLDIS and shall exercise, perform and discharge all the powers, duties and functions conferred or imposed on, or assigned to it under the Banking (Special Provisions) Act, No. 17 of 2023. |
| • | The Deposit Insurance and Resolution Department of CBSL has been assigned the above responsibility and is currently managing the SLDIS and carrying out compensation payments to depositors of the failed member institutions through this Scheme in an expeditious manner. |
Who are Member Institutions?
A member institution means a licensed commercial bank or a licensed specialised bank within the meaning of the Banking Act No. 30 of 1988 or a licensed finance company within the meaning of the Finance Business Act No. 42 of 2011 or any other institution as CBSL may determine, from time to time. Currently, all licensed commercial banks, licensed specialised banks and licensed finance companies are registered with SLDIS as member institutions.
Deposit insurance coverage under SLDIS
| • | Under SLDIS, insured depositors are compensated in the event of a failure of a member financial institution, up to a specified maximum amount of money. This is known as ‘coverage’ and the current coverage of SLDIS is Rs.1,100,000/- per depositor on per institution basis. In calculating the coverage, all insured deposit liabilities of each depositor denominated in both LKR and foreign currency, shall be aggregated to its equivalent LKR value, inclusive of any interest accrued as at the date of the cancellation of the licence of the member institution. |
| • | In the case of joint deposits, each joint depositor is considered as a separate depositor, and he/she will be compensated up to a maximum of Rs.1,100,000/- considering all insured deposits he/she possesses in the member institution. |
| • | If there are several beneficiaries for a claim of a deceased depositor, the individual payment up to Rs. 1,100,000/- is proportionately divided among the beneficiaries according to their respective share of the total deposits. |
Sri Lanka Deposit Insurance Fund
| • | CBSL, as part of the operation of the Scheme, shall establish a Sri Lanka Deposit Insurance Fund (SLDIF), which shall be managed separately from other assets of CBSL |
| • | As at end 2022, the Scheme comprised 67 member institutions with a total fund size of Rs. 86,107.9 million (audited). Details of SLDIF are given below. |
| Item | Amount (Rs. Mn) | |
| As at 31.12.2021 | As at 31.12.2022 | |
| Size of the fund | 67,877.3 | 86,107.9 |
| Other Comprehensive Income Reserve | (2,103.0) | (25,931.5) |
| Total Equity of SLDIF | 65,784.4 | 60,176.4 |
| Total Income | 19,298.9 | 24,882.9 |
| Total Expenditure | (96.6) | (226.3) |
| Surplus for the year (before tax) | 19,202.4 | 24,656.6 |
| Income Tax | (2,647.1) | (6,436.1) |
| Surplus for the year (after tax) | 16,555.2 | 18,220.6 |
| Total Assets | 74,443.9 | 69,017.6 |
| Investment in Government Securities | 69,529.2 | 63,596.0 |
| Loans and Recievables (net of provisions) | 381.9 | 192.7 |
Compensation payment
| • | The depositors of seven (07) finance companies, namely, Central Investments and Finance PLC (CIFL), The Standard Credit Finance Limited (TSCFL), TKS Finance Limited (TKSFL), The Finance Company PLC (TFC), ETI Finance Limited (ETIFL), Swarnamahal Financial Services PLC (SFSP) and Bimputh Finance PLC (BFP), of which the licences have been cancelled or suspended by the Monetary Board, are eligible to receive compensation up to Rs. 1,100,000 per depositor. |
| • | Total compensation paid by SLDIF as at 31.12.2022 is given below: |
| Name of the Company | Total Insured Value (Rs. Mn) | No. of Depositors Paid | Compensation Paid (Rs. Mn) | Compensation Paid as a Percentage of Total Insured Value |
| Central Investments and Finance PLC | 2,465.66 | 3,497 | 1,982.76 | 80.41% |
| The Standard Credit Finance Ltd. | 1,667.84 | 2,536 | 1,311.24 | 78.62% |
| TKS Finance PLC. | 1,190.74 | 1,876 | 1,017.37 | 85.44% |
| The Finance Company PLC. | 14,735.82 | 35,343 | 12,573.62 | 85.33% |
| ETI Finance Ltd. | 13,915.89 | 26,782 | 12,565.68 | 90.30% |
| Swarnamahal Financial Services PLC | 1,253.27 | 2,607 | 1,048.57 | 83.67% |
| Total | 35,229.22 | 72,641 | 30,499.24 | 86.57% |
Claim Form for Compensation Payment
Financial Statements of SLDIF
Sri Lanka Deposit Insurance and Liquidity Support Scheme Audited Financial Statements - 2022
Sri Lanka Deposit Insurance and Liquidity Support Scheme Audited Financial Statements - 2021
Sri Lanka Deposit Insurance and Liquidity Support Scheme Audited Financial Statements - 2020
Sri Lanka Deposit Insurance and Liquidity Support Scheme Audited Financial Statements - 2019
Sri Lanka Deposit Insurance and Liquidity Support Scheme Audited Financial Statements - 2018
Press Notices
10.11.2023 World Bank Approves $150 Million to Strengthen Sri Lanka’s Financial Sector Safety Net
Directions, Circulars and Gazettes
Contact us
Postal Address: Director, Deposit Insurance and Resolution Department, Central Bank of Sri Lanka, No 30, Janadipathi Mawatha, Colombo 01, Sri Lanka.
Telephone No: 0112477261
E-mail: sldis@cbsl.lk , ddir@cbsl.lk
Fax: 0112477748
Frequently Asked Questions
Related documents and links
Banking (Special Provisions) Act, No. 17 of 2023
Website of International Association of Deposit Insurers