Karachi, October 5, 2023 – The State Bank of Pakistan (SBP) has reiterated that bank depositors in the country are fully protected through insurance coverage, addressing concerns raised in certain media reports.
The SBP emphasizes that bank deposits above Rs 500,000 within the Pakistani banking system remain secure due to a robust regulatory framework and the presence of deposit insurance.
The SBP clarified that there is no reason for concern regarding the safety of deposits, as Pakistan’s banking system is known for its soundness, backed by stringent regulatory and supervisory measures. The system is characterized by strong capitalization, high liquidity, profitability, and a low level of net non-performing loans.
During the first half of CY23, the banking sector posted a strong profitability of Rs 284 billion, marking a substantial 125 percent increase compared to the first half of CY22. This surge in earnings has further strengthened the capital of banks, with the Capital Adequacy Ratio (CAR) of the banking sector reaching 17.8 percent by the end of June 2023. This CAR is significantly higher than SBP’s minimum regulatory requirement of 11.5 percent and the international standard of 10.5 percent. It enhances the banking sector’s ability to withstand severe shocks.
In addition to the inherent strength of the banking system, the Deposit Protection Corporation (DPC) provides an additional layer of protection by offering insurance coverage of up to Rs 500,000 for every depositor. This practice aligns with international standards and best practices in deposit protection.
Deposit protection is a fundamental element of safety nets utilized by supervisory authorities and deposit protection agencies worldwide. It ensures the protection of depositors’ funds in the unlikely event of a bank failure. The amount insured by the DPC becomes immediately accessible to depositors in the event of a bank’s failure. Furthermore, the remaining amounts of deposits are recoverable through a regulatory-assisted resolution process.
Currently, the Deposit Protection Act of 2016 safeguards 94 percent of depositors, providing them with comprehensive protection and reassurance in the stability of the banking sector.
