PDIC coverage to increase to P1 Million?

Pinoy Money Talk

Bank deposits worth up to P1 Million will soon be covered by the Philippine Deposit Insurance Corp. or PDIC, if House Bill (HB) 5812 is finally approved.

Makati City congressman Luis Campos Jr. filed House Bill 5812 that seeks to amend the PDIC charter, increasing the maximum deposit amount insured by the PDIC from P500,000 to P1,000,000 per depositor per bank.

Reimbursement limit of P500,000

At present, bank customers with savings or time deposit accounts worth at most P500,000 are insured in case of bank runs or bank holidays. This means the PDIC will reimburse or refund the customer the deposited amount — up to P500,000 — if the bank suffers from closure of operations.

If, for example, a depositor has P20,000 deposit in a bank shuttered by the Bangko Sentral ng Pilipinas (BSP), the depositor will receive a P20,000 refund from the PDIC. This ensures the protection of depositors so that customers will no longer have to individually run after closed banks.

However, if the depositor has, say, P3 Million worth of time or savings accounts in a closed bank, the PDIC will only refund the customer the maximum amount of P500,000.

HB 5812 seeks to address this limit by raising and doubling the deposit insurance coverage to P1 Million.

PDIC to increase deposit insurance coverage?

(See related post: Explanation of PDIC Coverage Deposit Scenarios)

Investment and insurance products not covered

Take note that only bank deposit products, such as time deposit or savings accounts, are covered by the PDIC. Investment products, such as Unit Investment Trust Funds (UITF), or bancassurance offers, such as insurance or VUL, are not included in the PDIC coverage.

According to the bill’s author, the bill will benefit more than 63 million bank depositors in the country.

With more and more Filipinos having deposits of at least P1 Million, HB 5812 will “encourage Filipinos to continue to keep their money in banks,” says Rep. Campos.

Records from the BSP show that 41 banks in the Philippines, mostly rural banks, shut down operations or were ordered closed since 2017. Thousands of depositors were affected and, even if they had millions of pesos worth of deposits in those banks, received reimbursement from the PDIC of up to P500,000 only as currently allowed by law.

The PDIC is a “government instrumentality” attached to the Department of Finance (DOF) operating since 1963. Its primary functions are to provide deposit insurance in order to strengthen public confidence in the banking system and to manage the receivership and liquidation of Philippine banks that closed down.

As of June 2019, the combined deposits in all Philippine banks reached P12.83 Trillion, 5.8% higher compared to the previous year.

The combined bank assets, meanwhile, stand at P17.243 Trillion, 9.8% higher than the previous year.

Pinoy Money Talk is an educational website about money, banking, investments, and personal finance which started in 2005. Its group of five writers consists of one equity research analyst, one fintech startup owner, one finance educator, and two investment professionals.