The National Bank of the Kyrgyz Republic has warned the public about placing money with organizations that lack authorization to accept deposits. Systematically raising funds from a broad group of people with promises of interest and repayment at a specified maturity may constitute illegal banking activity without the required authorization. Labeling these arrangements as loans, investments or partnerships does not change their legal substance. Only commercial banks, microfinance companies, housing savings and credit companies, and credit unions may accept deposits within the powers granted by a National Bank license. State registration or a license for a nonbanking activity does not confer this right. Savers should verify licensing and scrutinize promises of guaranteed returns substantially above market levels, unclear contractual terms and inadequate disclosure of how funds are used or returns generated. Such warning signs warrant further checks but do not necessarily establish a legal violation. Deposit protection covers eligible deposits at financial institutions participating in the protection system, with compensation capped at KGS 1 million per depositor at each institution when a guarantee event occurs. Money provided to an ordinary commercial organization under a loan or investment agreement does not become a bank deposit and is not covered by that system. Before committing funds, savers should check coverage and examine repayment arrangements, income payments, security for obligations and potential losses.

Original source