What You Should Know If You Have >RM60K In Your Bank Account

Posted by Kris | Sunday, December 30, 2007 | | 0 comments »

If you don't have>RM60K in your bank account like me, you can skip this article if you want to. Nevertheless, it is good to know that there is a fail-safe mechanism in Malaysia to protect your hard earn money in the case that the banks fails.

It is called the deposit insurance system. If we have insurance for our property, life then it is only logical to have insurance for our deposits. The only thing i am very surprised is that this system was only launched in 2005. (Nevertheless, i have to admit that i was very ignorant of financial matters back then)

Below is something i copied from PIDM's (Perbadanan Insurans Deposit Malaysia) website at http://www.pidm.gov.my/

1 September 2005

Administered by
Perbadanan Insurans Deposit Malaysia (PIDM) or Malaysia Deposit Insurance Corporation (MDIC)

- Licensed commercial banks- Licensed finance companies- Licensed Islamic banks

Premiums paid by member institutions

Annual Premium
- Flat rate for the first 2 years- Differential rate from the 3rd year onwards.

Section 43 of the PIDM Act provides for annual premiums to be paid by member institutions to PIDM based on their total insured deposits held as of 31 December of the preceding year. The maximum annual premium rate is 0.5% of the Islamic insured deposits and 0.5% of the conventional insured deposits.Consistent with PIDM's mandate to promote sound risk management practices among member institutions, a differential premium system will be implemented for the premium year 2008 and thereafter.

What is differential rate premium?

Since the level of risk that a member bank poses to the deposit insurance system is not equal. Therefore, the main purpose of using differential premium system is to price the risk fairly

Automatic (depositors do not need to apply)

Coverage limit
- RM60,000 (inclusive of principal & interest/return)- Per depositor per member institution

Types of depositor covered
All depositors (resident and non-resident individuals and businesses)

Separate coverage of RM60,000 for
- Conventional deposits- Islamic deposits- Joint accounts- Trust accounts- Accounts held by sole proprietorships, partnerships and professional practices

Insurable deposits
- Savings deposits- Current deposits- Fixed deposits- Investment deposits- Certified cheques, bank drafts & other payment instructions- Any other financial instruments as may be specified by PIDM from time to time

Deposits not insured
- Deposits not payable in Malaysia- Foreign currency deposits- Money market deposits- Negotiable instruments of deposit (NIDs) & other bearer deposits- Repurchase agreements- Any other financial instruments as may be specified by PIDM from time to time

The tables below provide examples on how deposit insurance coverage is calculated. ( Visit the website for more detail)