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ISLAMABAD: The Deposit Protection Corporation (DPC) has been set up through promulgation of the Deposit Protection Corporation Act to provide protection to small depositors of banks operating in Pakistan

An official said that the State Bank of Pakistan (SBP) has informed the Senate Finance Committee in a write-up that deposit protection mechanism is important tool to foster confidence among depositors and robustness of Pakistan’s banking sector. And by offering a safety net to depositors and mitigating potential crises, the deposit protection mechanism plays an important role.

The DPC was established through the promulgation of the Deposit Protection Corporation Act, 2016 subsequently, DPC advised a Deposit Protection Mechanism to the member banks in year 2018 both for the conventional and Islamic banking institutions. Key features of it included that all scheduled banks operating in Pakistan are required to be members of the DPC. This ensures that deposits in these banks come under the umbrella of the deposit protection mechanism.

Bank deposits in Pakistan are perfectly safe, clarifies SBP

In addition, deposit balances of all depositors present in their accounts are covered except for those depositors that are mentioned under Section 8 of the DPC Act. As per law, deposits like government and public sector, preferential interest bearing and related parties of banks, etc., are not protected under the deposit protection mechanism. As per the policy set by the DPC, there is a predefined coverage limit up to which deposits of each eligible depositor are protected on a bank-wise basis. The coverage amount at present is Rs500,000 per depositor per bank. The said limit fully covers 94 per cent of the depositors.

This limit was enhanced in the year 2021 from the previous coverage limit of Rs250,000 based on the evolving economic conditions and to optimise the coverage level. In case of bank failure, as declared by the SBP, DPC would compensate depositors up to the coverage limit.

In order to segregate Islamic Funds from Conventional Funds, the DPC has created two separate pools of funds Islamic Banking (called Deposit Protection Waqf) and Conventional Banking Fund.

The deposit protection fund is financed by the annual contribution from number of banks that is payable to DPC and the present rate of premium is 0.16 per cent of the eligible deposits of the respective bank on an annual basis.

Copyright Business Recorder, 2023

Comments

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Javed Mir Oct 15, 2023 02:23pm
But the guaranteed amount is too small!
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Saleem Oct 15, 2023 05:25pm
Best way to utilize money to start own business instead of keeping in banks. If all banks provide guarantee then why asking Five Lacs are protected. Some thing is wrong and can be happened in future.
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NAVEED MUZAFFAR Oct 15, 2023 10:10pm
How to claim rest of the amount in case of bank's default ?
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Ghareeb Awam Oct 16, 2023 09:34am
This is why rich people (you know who they are) keep their money in safe havens abroad. Nobody knows what happens here and when. Ghareeb Awam is always at the receiving end.
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