ISLAMABAD - The State Bank of Pakistan (SBP) on Thursday clarified that bank deposits are perfectly safe.
Deputy Governor of State Bank of Pakistan (SBP), Dr. Inayat Hussain, during the meeting of Senate Standing Committee on Finance and Revenue the other day, had given the impression that bank deposits above Rs500,000 in the banking system in Pakistan are unsafe.
“It is categorically stated that the deposits are safe owing to a sound banking system in Pakistan under a robust regulatory and supervisory framework of SBP,” said the central bank in a statement. The SBP deputy governor had said that if a bank fails, depositors with more than this amount in their accounts will not be guaranteed compensation. He said that 94% of account holders in Pakistan have deposits of less than Rs0.5 million while only 6% have deposits of more than it. Majority of depositors in Pakistan are protected by the Deposits Protection Corporation (DPC) which is a subsidiary of the central bank.
In addition to the soundness of the banking system, it added that the DPC has added another layer of protection by providing insurance cover of up to Rs500,000 to every depositor. This is in line with the best international practices and global trends. 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, the statement said.
The amount insured by the DPC becomes immediately available to depositors in case a bank fails. Nevertheless, remaining amounts of the deposits are also recoverable as the troubled bank is resolved through a regulatory assisted process.