What is it?
Perbadanan Insurans Deposit Malaysia (PIDM) is a government agency that aims to protect depositors. It is a body set up in 2005 under the Akta Perbadanan Insurans Deposit Malaysia (Malaysia Deposit Insurance Corporation Act) in order to roll out the Deposit Insurance System (DIS) and the Takaful and Insurance Benefits Protection System (TIPS).
PIDM leads to the stability of the financial system
The PIDM provides incentives for member institutions to implement proper risk management practices. It provides legal support when any of its member institutions are in trouble. In the case of dissolving a member institution, PIDM can take over the control of the institution and take actions to minimise costs for the institution and BNM.
All financial institutions are not a part of PIDM
Under the DIS, there are a number of institutions which are not a part of PIDM. These include all non-bank financial intermediaries, investment banks, developmental financial institutions and cooperative banks, and overseas branches of member banks. Institutions which are not under the purview of BNM are not a part of PIDM.
Under the TIPS, the institutions that are not within the purview of PIDM are international takaful operators licensed under the Islamic Financial Services Act (IFSA) 2013, reinsurance companies and retakaful operators, offshore insurance companies, financial guarantee insurers, such as Danajamin Nasional Berhad, and other players in the insurance industry, such as insurance brokers and adjusters.
Individual insurers do not pay, but are benefitted by PIDM
If you have taken insurance policies or a takaful certificate in Malaysia, it does not mean you will have to pay premiums to PIDM. The PIDM member institutions pay premiums for the protection facilities being provided to them. In the case of bankruptcy, you as a member of the DIS or TIPS, will be eligible for reimbursement of your deposits. The limit is RM250,000 for DIS, and for TIPS, the reimbursement is up to a limit of RM500,000. No registrations are required to initiate the service. Additionally, no claims are to be made from your end in the case of bankruptcy, making the process fairly automatic.
Only selected products are protected under the PIDM
All products and accounts are not protected under the PIDM. The products that are protected under the DIS system are savings account, current account, and fixed deposits. The limit of RM250,000 extends to the principal amount and its interest as applicable on the products. In the case of TIPS, any insurance certificate issued in Malaysia with the denomination as RM shall be protected under the scheme. This would also include third party claims, annuity/retirement income, cash dividend, disability income, and refund of prepaid contributions and premiums.
So what products are not covered under PIDM?
Accounts that are not protected under the DIS are investment accounts, gold-related investment products or accounts, unit trusts, stocks and shares, and deposits that are not payable in Malaysia. Products that are not covered under TIPS are certificates in foreign currency or issued out of Malaysia, or the investment portion of investment linked products. Loss in the product due to acts of dishonesty or professional negligence are covered under TIPS.
Multiple coverage for users
For different types of accounts, the coverage is provided separately. For example, if you have different savings/current accounts as an individual, joint account, and as a business account, you shall be eligible for separate coverage under each of the accounts. Similarly, for TIPS, the individual and group policies are eligible for separate coverage.
Termination of membership for banks are not voluntary in nature
In case you are worried that your bank might not opt to be a member of the PIDM and thus you will be denied from the coverage, worry not. All eligible institutions are permanent members under the PIDM unless their membership has been terminated. In the case of insolvency of the institution, the institution will be terminated and will not be able to issue new products to customers. In the case of the licence being revoked or surrendered to BNM, the bank’s membership from the PIDM shall also be cancelled.
To summarise, PIDM protects your deposited wealth from any sort of emergency situations, like nationwide financial collapse. All commercial banks, foreign banks operating in Malaysia, and Islamic banks are member institutions of PUDM.