The Deposit Protection Board (DPC) is worried about government's failure to recapitalise the corporation which now has just about US$12 million in its coffers, a figure insufficient to meet the needs of depositors in the event of bank closures.
The Deposit Protection Fund's primary function is to compensate depositors in full or in part for losses incurred in the event of insolvency of a contributory institution. It was created as a government policy in response to a growing need to moderate instability in the banking sector, as well as to protect the public against the worst consequences of bank failure.
The Fund is vested in and administered by the DPC.
The company's chief executive officer John Chikura however, said since its establishment in 2003 the fund had not been funded by government but by banking institutions through payment of levies.
"The deposit balance in the fund as at 31 December 2013 [which is an audited figure] was US$11,995,515.
"The fund is under-capitalised and there is a great need for capitalisation of the deposit insurance fund. A figure of US$50 million standing to the credit in the fund is ideal to ensure adequate coverage of deposits, especially those under the central bank's watch list," Chikura said.
He said the three banks Genesis, Royal and Trust Bank insured a total of US$812 523 and so far US$447 969 had been paid to depositors.
"We have so far paid US$8 031, that is 68% of the total insured for Genesis Bank. We have paid 72% from a total of US$472 206 for Royal Bank and 33% for Trust Bank Corporation out of a total of US$328 516," he said.
Chikura said Genesis depositors were receiving US$150 per depositor while Royal and Trust Bank depositors were receiving US$500 per depositor.
The DPC needs to be recapitalized to the tune of US$50 million which is equivalent to the exposure from the list of weak banks.
"We are currently under-capitalised and we are making efforts to have the fund capitalised and enable the corporation to adequately cover depositors and even increase the coverage limit from the current US$500," he said.
Chikura said the reduction in the deposit Protection premiums had affected the corporation as the contribution by members had been reduced.
In his 2014 national budget, Finance minister Patrick Chinamasa reduced the levy from 0,3% to 0,2% of total deposits without fixing a cap, but excluding government deposits and foreign lines of credit.
The Fund offers limited coverage and guarantees that small depositors will be paid in full up to the insured amount in the event of bank failure.
According to the DPC, the prescribed maximum deposit compensation covers in full 93% of all depositors operating accounts in contributory institutions.