KARACHI: The State Bank of Pakistan (SBP) has reaffirmed its commitment to safeguarding the interests of the country’s bank depositors, ensuring protection for approximately 99% of all account holders through its robust deposit protection framework.
In a recent announcement, the SBP revealed that 78.3 million, or 98.9% of depositors, are eligible for protection in the unlikely event of a bank failure. This highlights the strength and inclusivity of the deposit protection regime, which aims to bolster financial stability and public confidence in the banking system.
DPC’s Role and Financial Growth
The Deposit Protection Corporation (DPC), a subsidiary of the SBP, released its fourth annual report for the fiscal year ending June 30, 2024. The report detailed significant milestones, including the growth of the Deposit Protection Fund to Rs148 billion. This fund ensures timely compensation to eligible depositors if a member bank faces insolvency, reinforcing the DPC’s critical role in maintaining financial stability.
By mid-2024, Pakistan’s banking system encompassed 79.2 million depositors, with 64.8 million under conventional banking and 14.4 million using Islamic banking services. Of these, 98.9% were protected, underscoring the regime’s extensive coverage. Total bank deposits exceeded Rs31 trillion by June 2024, with conventional banking contributing Rs23.8 trillion and Islamic banking accounting for Rs7.4 trillion. Deposits grew by an impressive 22% year-on-year (YoY), reflecting strong public trust and a resilient banking system.
Drivers of Deposit Growth
The surge in deposits during FY24 was attributed to several factors, including the SBP’s tight monetary policy, which maintained high interest rates to curb inflation. This environment encouraged deposit growth, with eligible deposits increasing by 20% YoY to Rs16.9 trillion in June 2024 from Rs14 trillion the previous year.
Investment and Compensation Achievements
The DPC’s investment portfolio reached Rs148 billion, a 48% YoY increase. Income for FY24 totaled Rs48 billion, driven by Rs26 billion from strategic investments and Rs22 billion in premiums collected from member banks.
Notably, the report highlighted that over 92% of protected deposits from SME Bank were paid out following its closure under government approval. The bank was declared failed under the Deposit Protection Corporation Act, 2016.
The SBP’s robust deposit protection measures underscore its dedication to financial stability and depositor confidence, ensuring the safety of nearly all account holders in Pakistan’s banking system.
