The importance of the NDIC is covered in this article.
You’ve undoubtedly seen a variety of insurance presentations and publications, and you might even currently have some assets insured, so you likely have a good understanding of what insurance is. You undoubtedly have one or more accounts, and with the exception of occasionally unavailable ATMs, service fees from your bank, or unreliable banking apps, you feel reasonably certain that your money is secure in those accounts. What connection exists between your bank account and insurance, then? NDIC is the answer to it.
The Federal Republic of Nigeria’s independent agency is called the NDIC (Nigeria Deposit Insurance Corporation). In the event that a financial institution is unable to refund depositors, this agency will guarantee the settlement of insured funds and protect depositors, stabilizing the financial system.
In other words, the NDIC steps in to protect account holders from losing their deposits should a Nigerian financial company fail.
Why is the NDIC Important?
The quick explanation is because of the way banks work. Account fees, ATM fees, commission charges (for the investing arm), and application costs are only a few of the expenses used to operate banks. Banks do, however, earn money through investments like interest on loans in addition to fees. An agency like the NDIC is required in situations like these.
The cash deposits that depositors make is used to fund the loans. For instance, if you deposit N100,000 into your bank account, the bank will technically consider that money as a “loan” because it might be utilized to invest in something that will generate income for the bank.
It is “working” money since it is being utilized to complete other transactions that shouldn’t fail, even if it is visible in your account and is available at any time.
WHY DO BANKS FAIL?
When several investments fail in a short period of time, banks may collapse or be unable to pay their depositors. When this occurs, the general public typically experiences panic, which compels depositors to begin taking all of their money right away.
How Does The NDIC Come in?
Without an agency like the NDIC, when clients start making frantic withdrawals, banks won’t be able to pay their deposits, which has a cascading effect. Any exchanges with other banks immediately stall. Because of an agency like the NDIC, events of this size rarely occur.
Along with this, banks perform specific checks to make sure they are not placed in a position where they are unable to make money easily accessible to their depositors.
Despite being done in the background, the NDIC’s work is important. As the agency that protects financial institutions, think of it. Whenever you use an ATM to withdraw cash, send money, or haphazardly check your bank account and everything appears to be in order. Speak a soft “thank you” to the NDIC.