Pakistan’s Banking System: Is Your Deposit Above Rs500,000 Protected?


Dr. Inayat Hussain, the Deputy Governor of the State Bank of Pakistan (SBP), recently provided clarification during a Senate Standing Committee on Finance and Revenue meeting. In a proposal to address concerns about the security of bank deposits exceeding Rs500,000.

Dr. Hussain emphasized that the SBP offers insurance coverage of up to Rs500,000 per depositor in the unfortunate event of a bank default.

However, certain sections of the media misinterpreted Dr. Hussain’s statement, leading to anxiety among individuals with substantial bank deposits. In response, the SBP has issued an official statement to relieve these concerns and affirm the safety of larger deposits.

The SBP’s statement places a strong emphasis on the robust regulatory and supervisory framework in place in Pakistan, guaranteeing the security of deposits. Pakistan’s banking system is highlighted as well-capitalized, highly liquid, and profitable, boasting a notably low level of net non-performing loans (bad loans). The banking sector recorded a commendable Rs284 billion in profitability during the first half of CY23, marking a remarkable 125% increase compared to the same period in CY22.

These increased earnings have subsequently fortified the capital positions of banks, with the Capital Adequacy Ratio (CAR) for the banking sector reaching 17.8% by the end of June 2023. This surpasses both the SBP’s minimum regulatory requirement of 11.5% and the international standard of 10.5%. Such enhanced solvency buffers further bolster the resilience of Pakistan’s banking sector against severe shocks.

The concept of deposit protection is recognized as a crucial component of safety nets employed by supervisory authorities and deposit protection agencies worldwide. Its primary purpose is to protect depositors’ funds in the rare event of a bank failure. In the unfortunate event of such a failure, the insured amount becomes immediately available to depositors, while the remaining deposits can be recovered through a regulatory-assisted resolution process. Remarkably, under the Deposit Protection Act of 2016, 94% of depositors currently enjoy full protection.

Ammara Ahmed

Ammara Ahmed

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