President Uhuru Kenyatta has declined to sign into law a bill that sought to cushion Kenyans from collapsed banks.
The National Assembly Speaker, Justin Bedan Muturi, on Thursday, February 3, told parliamentarians that the Head of State had refused to sign the Kenya Deposit Insurance Bill, which the Legislators passed last year.
The Kenya Deposit Insurance (Amendment) Bill 2020 sought to give a minimum deposit guarantee of Ksh1 million for accounts held in collapsed banks.
National Assembly Speaker Justin Muturi arrives in parliament in company of a Sergeant at Arms in a past session.
Speaker Muturi stated that the President, by a way of a memorandum, referred the Bill back to the National Assembly for reconsideration.
Uhuru expressed reservations on Clause 2 of the Bill, which aims to amend Section 28 of the Kenya Deposit Insurance Act.
The amendment sought to cap the waiting period to six months for customers to be compensated once a financial institution collapses. The compensation is in respect to a protected deposit when a banking institution is goes In Receivership (IR).
The amendment also sought to increase from Ksh100,000 to Ksh1 million the minimum guarantee under such circumstances that a bank goes down.
“This Act may be cited as the Kenya Deposit Insurance (Amendment) Act, 2020. Section 28 of the Kenya Deposit Insurance Amendment Act, is amended by deleting the words “one hundred thousand shillings” and substituting therefor the words “one million shillings”.
“The corporation shall make the payment to a customer under subsection (1) within six months or any shorter period following the conclusion of liquidation of the institution insured,” read the proposed amendments in part.
Banking institutions that would contravene the proposed amendments would see the persons in charge fined Ksh1 million or imprisoned for three years.
The law currently provides that KDIC insures all bank accounts that have Ksh100,000 and below. The Bill sought to increase this coverage to Ksh1 million and below.
Initially, KDIC had opposed the Bill, opining that if passed it would raise its exposure from Ksh130 billion to Ksh950 billion. Notably, KDIC is an independent body that manages deposit refunds in collapsed banks.
The Bill also sought to have compensation made for each account instead of per depositor.
President Uhuru Kenyatta signs a bill into law in December 2020.