The Kenya Deposit Insurance Corporation (KDIC) is set to wind up two collapsed lenders, Ari Bank, and Reliance Bank, serving the last rites for the institutions under liquidation for decades now.
Winding up is the process of dissolving a business by liquidating stock, paying off creditors, and distributing any remaining shareholder assets.
On Thursday, KDIC requested proposals on the provision of legal and audit services for the wind-up of the banks.
Ari Bank Corporation Limited has been in liquidation since December 5, 1997, and had Sh287,000 in total deposits.
As of the end of June 2021, KDIC reported it had paid out 55 percent of the institution’s protected deposits, or Sh6,000 from a pool of Sh11,000 in protected deposits.
Similarly, the KDIC disclosed the payment of Sh45 million to uninsured depositors and creditors at the end of the same period.
Reliance Bank Limited was placed in liquidation in September of 2000 and had Sh969,000 in total deposits.
Out of the deposits, about Sh88,000 was protected by KDIC which has so far paid out Sh57,000 or 57 percent.
Additionally, the KDIC has paid out Sh142 million to the bank’s unsecured depositors and creditors as of June 2021.
The two banks had Sh453 million and Sh1.5 billion loans as at liquidation respectively from which KDIC has made recoveries totalling Sh1.8 million and Sh46,000 respectively.
Ari and Reliance banks are expected to join a list of nine other wound-up banks including Allied Credit, International Finance Limited, Trade Finance, Diners Finance, Nairobi Finance, Inter-Africa Credit Finance, Central Finance, Heritage Bank, and Fortune Finance.
All nine troubled lenders were placed in liquidation between 1993 and 2000 when Kenya witnessed the highest incident of bank failures in its history.
Liquidation refers to the last option in the resolution of a problem bank where depositors are promptly paid their insured deposits after the closure of the bank after which further payouts are realized from the sale of assets and other recoveries.
Winding Up meanwhile describes the process of serving out last rites and marks the end of the liquidation process.
