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Business & Finance

Bank deposits in Pakistan are perfectly safe, clarifies SBP

  • Central bank's statement comes after certain sections of the media, on basis of a statement given by a deputy governor SBP, imply as if bank deposits above Rs500,000 are unsafe
Published October 5, 2023

The State Bank of Pakistan (SBP) on Thursday refuted reports suggesting that bank deposits above Rs500,000 in the banking system are unsafe.

In a statement, the central bank said that “certain sections of the media, on the basis of a statement given by Deputy Governor of SBP, Dr Inayat Hussain during the meeting of Senate Standing Committee on Finance and Revenue, are implying as if 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.”

The rebuttal come after Dr Inayat Hussain said only deposits up to Rs0.5 million are protected by the Deposit Protection Corporation (DPC), a subsidiary of the SBP, and that as per regulations, deposits above this amount are not protected if a bank goes bankrupt.

Responding to the remarks, which irked sentiments among the masses, SBP said the banking system in Pakistan is sound and insurance cover of up to Rs500,000 for every depositor is an added layer of protection provided by the DPC.

It said the banking network in Pakistan is adequately capitalised, highly liquid and profitable with a low level of net non-performing loans, i.e. bad loans.

“The sector posted a strong profitability of Rs284 billion in first half of CY23, which is almost 125% higher than the first half of CY22,” it said.

“The higher earnings, in turn, also strengthened the capital of banks and the Capital Adequacy Ratio (CAR) of the banking sector increased to 17.8% by end June 2023 compared to 16.1 percent as of end June 2022, substantially higher than SBP’s minimum regulatory requirement of 11.5 percent and international standard of 10.5 percent,” it added.

“With improvement in solvency buffers, the ability of the banking sector to withstand a set of severe shocks has further improved.”

“This is in line with the best international practices and global trends,” it said.

The central bank highlighted that 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 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. Currently, 94% of the depositors are fully protected under the Deposit Protection Act of 2016.”

Comments

Comments are closed.

KU Oct 05, 2023 01:16pm
Pathetic state of affairs and governance. This news is supposed to instill confidence in people? And we are not even touching upon foreign investment and remittances.
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Johnny Walker Oct 05, 2023 02:23pm
"the SBP said the banking system in Pakistan is sound and insurance cover of up to Rs500,000 for every depositor is another layer of protection provided by the DPC." Dr. Inayat Hussain is absolutely right in saying that only 5 lacs are protected. SBP is covering up by using jargon and stating that banking system is robust and sound, which it is not. Most banks are undercapitalised if their non performing loans are written down.
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SMD Oct 05, 2023 02:40pm
If you Google it , the deposit insurance covers 250k , and this article doesn't say anywhere that above 500 k deposits are safe . Keep your money safe people
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M.F.G.N, Oct 05, 2023 02:43pm
A news item that could have resulted in a bank-run seemed like something pulled off by the ill-wishers of our state. Quite surprising to see the Deputy Governor of State Bank behind it.
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XY Oct 05, 2023 03:02pm
Thats what was said in 1998!
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XY Oct 05, 2023 03:03pm
Bank deposits in Pakistan are perfectly safe, clarifies SBP... Who would buy this from clueless generals.
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Tulukan Mairandi Oct 05, 2023 03:33pm
Definitely unsafe. All banks are on the verge of collapse
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Hilarious Oct 05, 2023 03:40pm
That’s just one if the aspects of a fractional reserve banking system. It’s the same the world over, although the amounts covered under the protection mechanisms may differ.
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Hilarious Oct 05, 2023 03:43pm
HBL cash deposit reserves are 0.16 for every rupee deposited and I believe it’s lower for the other banks, but can’t be bothered to check. Also, this is the system where a majority of the fiat money is “created” not via. The state/central banks as most people would presume.
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Muhammad Akbar Oct 05, 2023 03:56pm
This is Hypocrisy at it’s worst. I have been receiving emails since last year from Standard Chartered Bank stating clearly that under SBP rules, the protection is limited to 500,000 only and that is the truth unless the SCB clarifies in no unclear words as it did in the above statement
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Ghareeb Awam Oct 05, 2023 04:05pm
Our (financial) suicidal tendencies are increasing by the day. What impression will be gathered by the common man as well as the foreign investors about an economy already on the deathbed after reading first the ominous warnings and then their rebuttal by the SBP. We are masters of doing wrongs all the time.
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Haris Oct 05, 2023 04:09pm
Along with tackling the smuggling we in dire need to tackle the media because its 97% fake and irresponsible.
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Haris Oct 05, 2023 04:11pm
@Tulukan Mairandi, hahahahahah. dumbster, in Pakistan its Banks who are minting money alot. while sitting in India if you dont know nothing then its not necessary to speak in every matter. btw i really enjoy your comments :D:D:D:DD:
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faisal Oct 05, 2023 05:06pm
Deposits may be safe, but banks are not safe. They have to take a hit due to government unable to pay interest.
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K A Abbasi Oct 08, 2023 11:10pm
It is unambiguously reiterated by SBP that deposits up to Rs. 500,000 are ensured, which means an amount exceeding is not guaranteed. However, in clarification it says the excess amount is recoverable. Which means recovery of amount deposited other than 0.5M without interest will be released in an indefinite period (of time).
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Ahmad Oct 09, 2023 03:26am
Its so shameful that people with some political agenda are trying to create a choas and confusion without any reason. There are not doing any good service to the nation, just misguiding innocent people. Banks in Pakistan are regulated according to international standards, have robust and adequate capital adequacy requirement regulations and there are no such conditions in which any bank is in a state of near default. Has any bank in Pakistan has ever defaulted? I advise people not to spread disinformation due to political motives as Pakistan is supreme than your political leader.
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Shazia Oct 12, 2023 01:09pm
Nice
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