Dubai Bank has become the first lender in a decade to go under, a move that could dent public confidence in the sector. PHOTO | FILE
What you need to know:
Dubai Bank was placed under receivership last month by the Central Bank of Kenya following serious liquidity and capital deficiencies. The receiver manager, however, recommended its liquidation barely a week later.
The liquidator of Dubai Bank Kenya is set to start compensation of the collapsed lender’s customers for up to Sh100,000 of their deposits.
The CBK’s Kenya Deposit Insurance Corporation on Thursday said it will from Monday pay depositors who have already filled claim forms through their bank accounts and mobile money system M-Pesa.
Dubai Bank was placed under receivership last month by the Central Bank of Kenya following serious liquidity and capital deficiencies. The receiver manager, however, recommended its liquidation barely a week later.
“KDIC has commenced processing payment of protected deposits of up to Sh100,000 per account and will, from September 7, 2015, pay all claims whose forms have been duly completed and returned to KDIC.
The lender was holding Sh1.7 billion in customer savings at the end of last year as per CBK data, but the amount had dropped to about Sh1.4 billion as at the time of collapse.
“Payment will be made through individuals’ bank accounts and/or M-Pesa as provided by the claimant. Other deposit and creditor balances will be paid as and when funds become available from the liquidation,” KDIC said on Thursday.
Dubai Bank had accumulated more than Sh5.3 million in penalties, failed to meet cash ratio requirements for a month and defaulted on paying Sh48 million owed to Bank of Africa.
The bank became the first lender in a decade to go under, a move that could dent public confidence in the sector.
Its management has been accused of cooking its books in recent years. In June this year CBK said the bank had lied that its liquidity ratios stood at 27.1 per cent at the end of last year and 21.4 per cent in March while investigations showed the actual figure was 9.6 per cent.
Under the law, banks must maintain a liquidity ratio of not less than 20 per cent. The bank has been accused in court filings of under-providing for its bad loans, resulting in its declaration of false profits. Last year it posted Sh7 million in pre-tax profits.
Managing director, Binay Dutta fled the country in June this year in the middle of a court battle in which a Turkish businessman, Sevket Tunc, was seeking court orders to wind up the bank for breach of contract.
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