Sri Lanka boosts deposit insurance cover 50-pct

COLOMBO (EconomyNext) – Sri Lanka has boost deposit insurance cover to 300,000 (2300 US dollars) per depositor up 50 percent from the earlier 200,000, the Central Bank said.

The Sri Lanka Deposit Insurance and Liquidity Support Scheme (SLDILSS) is managed by the Central Bank and is expected toprotect small depositors in case a bank fails.

Deposit insurance however can increase moral hazard by taking away the incentive for depositors to look at the risk or credit rating of a deposit taking institution before investing there.

However in most regulatory regimes in advanced markets deposit insurance is available for small deposits.

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