Kazakhstan wraps up tenge deposit compensation program, allocates nearly $661 million
The program was announced in a joint statement by the Kazakh government and the National Bank of Kazakhstan published on February 24, 2022. Explaining the reasoning behind the program, the statement said it seeks to ensure the stability of the financial market and maintain the attractiveness of tenge deposits amid the increased geopolitical risks and volatility in the financial markets.
Who is eligible for the compensation?
Deposits of individuals in tenge, opened in second-tier banks as of February 23, 2022, were allowed to participate in the program. Only those who submitted the request for compensation are eligible for the compensation.
The banks accepted applications for compensation within five months, from September 2022 to February 2023. Acceptance of applications ended on February 10, 2023.
How is the compensation paid?
Compensation in the amount of 10 percent is accrued to one person in each bank on the specified deposits in the total amount of up to 20 million tenge ($43,095). Compensation is not subject to individual income tax.
The bonus will be accrued to the minimum amount on the account from February 23, 2022, to February 23, 2023, but no more than two million tenge ($4,310).
One of the other prerequisites for accrual of the bonus is the preservation of the deposit in the second-tier bank until the end of its term, but not less than 12 months after the introduction of the mechanism, i.e., until February 24, 2023.
If the deposit expires during the period before the compensation is paid, it must be extended until the end of the program. In case of partial withdrawal of the deposit, the payment of compensation shall be made for the amount of the deposit balance after withdrawal, subject to the above limits.
Compensation on tenge deposits is paid at the expense of the Ministry of Finance and the National Bank of Kazakhstan.
How much money will be paid in compensation?
On March 16, Kazakhstan’s Deposit Guarantee Fund announced funds for paying out compensation were received by second-tier banks. The total amount of funds sent reached 306.6 billion tenge ($660.6 million) and 2,615,772 people will receive the compensation.
«We are glad to report that the compensation payment procedure is coming to an end. On March 15, the Kazakhstan Deposit Guarantee Fund received the final registers of depositors from the banks and handed them over to the payout operator. In the coming days, the banks will complete payments in full,» said the fund’s deputy chairman Almaz Kudaibergenov.
According to the rules, within two working days until March 20, 2023, the second-tier banks will transfer the due compensation to the accounts of the depositors who submitted applications.
What do experts say?
Independent financial analyst Andrei Chebotarev commended the compensation mechanism.
«Today, people received real money. The program has justified itself. At the time of the crisis a year ago, there were no outflows from deposits. On the contrary, during the year, we showed record new deposits,» said Chebotarev.
He also noted that the funds for the procedure were taken not from the National Fund but from the state budget.
»The program ended successfully enough because it fulfilled its tasks,» said the expert.
The volume of tenge deposits in tenge growing in Kazakhstan
According to the Agency for Regulation and Development of the Financial Market, 2022 saw a 14.1 percent increase in the volume of deposits in deposit-taking organizations, reaching 30.9 trillion tenge ($66.6 billion).
At that, the deposits of legal entities increased by 10.5 percent up to 15.3 trillion tenge ($33 billion), whereas deposits of individuals grew by 18 percent up to 15.6 trillion tenge ($33.6 billion).
Tenge deposits accounted for 68.4 percent of all deposits in 2022. They increased by 22 percent to 21.1 trillion tenge ($45.5 billion), while foreign currency deposits increased by 0.2 percent to 9.8 trillion tenge ($21.1 billion).
In December 2022, the weighted average interest rate on term deposits in national currency of non-banking legal entities was 14.4 percent, compared to 7.4 percent in December 2021. and on individuals' deposits - 13.3 percent, in contrast to 8 percent in December 2021.
National currency deposits in January 2023 decreased by 0.4 percent to 21.1 trillion tenge ($45.5 billion), while foreign currency deposits decreased by 2.8 percent to 9.5 trillion tenge (US$20.5 billion), including against the background of strengthening of the tenge against the U.S. dollar by 0.5 percent.