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Bank Deposits Above Rs500,000 Safe, Confirms State Bank of Pakistan

The State Bank of Pakistan (SBP) has issued a clarification on the safety and protection of bank deposits in the country, following some media reports that suggested otherwise.

The SBP said that customer deposits are “perfectly safe” due to the sound banking system in Pakistan, which is adequately capitalized, highly liquid, profitable, and has a low level of bad loans.

The SBP also said that the Deposit Protection Corporation (DPC), a subsidiary of SBP, provides an additional layer of protection by offering insurance cover of up to Rs500,000 to every depositor in case of a bank failure.

The DPC is a statutory body established under the Deposit Protection Act of 2016, which aims to protect the depositors’ funds and promote financial stability in the banking sector.

The SBP clarified that in the unlikely event of a bank failure, the DPC would pay the insured amount to the depositors immediately, while the remaining amount of the deposits would be recoverable through a regulatory-assisted process.

The SBP’s clarification came after a briefing by its deputy governor, Inayat Hussain, to the Senate Standing Committee on Finance and Revenue on Wednesday, where he said that only deposits up to Rs500,000 have legal protection under the DPC.

He warned that if a bank fails, depositors with more than Rs500,000 in their accounts would not be guaranteed compensation. He added that 94% of account holders in Pakistan have deposits of less than Rs500,000, while only 6% have more than that.

He also said that all the scheduled banks operating in the country are required to be members of DPC and pay subscription fees every year to fund its operations.

He further informed that the SBP has appointed a focal person in each bank to facilitate the account opening procedures for politically exposed persons (PEPs), who face difficulties due to enhanced due diligence requirements.

The SBP urged the public to ignore any misleading information regarding the safety and protection of bank deposits and assured them of its commitment to safeguarding their interests.

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