Sri Lanka deposit insurance scheme

It was reported in an English weekend newspaper recently that Mr. Sriyan Cooray, Chairman of NDB, has assured customers that their deposits remain fully secure, with the financial impact of the recent fraud being absorbed through the bank’s capital and reserves.

While such assurances are welcome, this development highlights the urgent need for a policy-level response to reinforce public confidence in the banking system. In particular, the depositor insurance threshold under Sri Lanka Deposit Insurance Scheme (SLDIS) —currently capped at Rs. 1.1 million—should be reviewed and enhanced to a more realistic level, such as Rs. 2–3 million.

Rationale for Increasing Deposit Insurance Coverage:

A higher insurance limit reassures depositors, especially small and medium savers, that their funds are better protected against unforeseen institutional risks similar to the NDB fraud.

With inflation and rising living costs, the current threshold no longer reflects the average depositor’s savings exposure.

Strengthening deposit protection mechanisms reduces the risk of panic withdrawals (even  leading to run on banks)  and reinforces overall financial system resilience.

Furthermore, the role of external auditors must also come under scrutiny. Where significant irregularities go undetected over extended periods, questions arise regarding the adequacy of audit procedures and professional diligence. In such instances, it is reasonable to expect accountability, including a review/refund of audit fees in light of any lapses.

Mohamed Zahran