The State Bank of Pakistan (SBP) on Thursday refuted reports suggesting that bank deposits above Rs500,000 in the banking system are unsafe.
In its clarification, the central bank said that customer deposits are “perfectly safe” owing to the sound banking system in Pakistan.
“The banking system in Pakistan is adequately capitalized, highly liquid and profitable with a low level of net non-performing loans, i.e. bad loans. The sector posted a strong profitability of Rs284 billion in first half of CY23, which is almost 125 percent higher than the first half of CY22.”
The SBP added that the Deposit Protection Corporation (DPC), a subsidiary of SBP, has added another layer of protection by providing insurance cover of up to Rs500,000 to every depositor.
“Deposit protection is one of the key elements of safety net used by supervisory authorities and deposit protection agencies around the world to provide protection to the depositors’ funds in the unlikely event of a bank failure.”
“Nevertheless, the remaining amounts of the deposits are also recoverable as the troubled bank is resolved through a regulatory-assisted process. Currently, 94% of the depositors are fully protected under the Deposit Protection Act of 2016.”
“Nevertheless, the remaining amounts of the deposits are also recoverable as the troubled bank is resolved through a regulatory-assisted process. Currently, 94% of the depositors are fully protected under the Deposit Protection Act of 2016,” it added.
The clarification comes after Briefing the Senate Standing Committee on Finance and Revenue on Deposits Protection Corporation (DPC), SBP Deputy Governor Inayat Hussain said that the funds of depositors had legal protection worth Rs 500,000.
Inayat Hussain warned that if a bank fails, depositors with more than Rs 500,000 in their accounts will not be guaranteed compensation.
SBP deputy governor further said that 94pc of account holders in Pakistan have deposits of less than Rs0.5 million while only 6pc have deposits of more than it.
This means the vast majority of depositors in Pakistan are protected by the Deposits Protection Corporation (DPC). The DPC collects subscription fees from banks every year to fund its operations.
He said that all the scheduled banks operating in the country were required to be members of DPC to ensure the deposits in these banks come under the umbrella of the deposit protection mechanism.
While briefing on the account opening issue faced by the Politically Exposed Persons (PEP), SBP officials informed that a focal person had appointed in each bank to facilitate the PEP in their account opening procedures.
 on Thursday refuted reports suggesting that bank deposits above Rs500,000 in the banking system are unsafe.){kind=link}