Deposit insurance is a system established by the Government to protect depositors against the loss of their insured deposits placed with member institutions in the event of a member institution failure. Commercial and Islamic banks that are member institutions of PIDM are also referred to as ‘member banks’.
As an integral component of an effective financial safety net, a deposit insurance system enhances consumer protection by providing explicit protection to depositors. Depositors will know when, how much and how their deposits are insured in the event that a member bank is bankrupt or is unable to make payment to depositors.
In Malaysia, the Deposit Insurance System was brought into effect in September 2005 and is administered by Perbadanan Insurans Deposit Malaysia (PIDM).
Also known as the Malaysia Deposit Insurance Corporation (MDIC), PIDM (Perbadanan Insurans Deposit Malaysia) is a government body responsible for Protecting Insurance and Deposits in Malaysia.
Benefits to depositors
• PIDM protects your bank deposits and will promptly reimburse you on your insured deposits should a member bank fail
• The protection is provided by PIDM automatically - no application is required
Benefits to the financial system
• PIDM promotes public confidence in Malaysia’s financial system by protecting depositors against the loss of their deposits
• PIDM reinforces and complements the existing regulatory and supervisory framework by providing incentives for sound risk management in the financial system
• PIDM minimises costs to the financial system by finding least cost solutions to resolve failing member institutions
• PIDM contributes to the stability of the financial system by dealing with member institution failures expeditiously and reimbursing depositors as soon as possible
Deposit insurance is recognised internationally as an important form of consumer protection and has been implemented in over 100 countries around the world, with the earliest system dating back to 1930s.
All types of depositors, whether businesses or individuals, are protected. The maximum limit of coverage is RM250,000 per depositor per member bank. This includes both the principal amount of a deposit and the interest/return. With the RM250,000 limit, 99% of depositors are protected in full. The Malaysian Deposit Insurance System provides separate coverage for conventional and Islamic deposits.Deposits eligible for protection• Savings accounts• Current accounts• Fixed deposits• Foreign currency deposits• Principal-guaranteed conventional structured products• Islamic deposit accounts such as wadiah savings accounts and Mudharabah investment deposits• Bank drafts, cheques, other payment instructions or instruments made against a deposit accountPIDM may approve any other financial instruments as being eligible for deposit insurance protection from time to time.Products NOT eligible for protection• Conventional structured products that are not principal-guaranteed• Deposits not payable in Malaysia• Interbank money market placements• Negotiable instruments of deposit (NIDs) and other bearer deposits• Repurchase agreements• Unit trusts, stocks and shares• Gold-related investment products or accountsThere is also separate deposit insurance protection of up to RM250,000 for a depositor with deposit accounts under each of the following categories:a. Conventional and Islamic deposit accountsb. Joint accounts - Joint accounts enjoy separate deposit insurance protection provided the records of the member bank disclose the names of the joint account holdersc. Trust accounts - Beneficiaries will enjoy separate protection if the trustee discloses the interest of each beneficiary and the amounts owed to each beneficiary on the records of the member bank. Each beneficiary of the trust account is protected up to RM250,000, separately from other insured deposits held in their individual names.d. Accounts held by sole proprietorships, partnerships, professional practices and companies