Deposit protection enhanced to Rs0.5m

Increased guarantee provides full protection to 95% of depositors: SBP

KARACHI:

Deposit Protection Corporation (DPC) has increased the guarantee amount for all eligible depositors of banks from Rs250,000 to Rs500,000.

According to a statement issued by the State Bank of Pakistan (SBP), the decision was taken by board members of the corporation in a meeting held on September 6, 2021.

“This enhanced guarantee amount provides full protection to 95% of the eligible depositors,” it said.

The main objective of the deposit protection scheme is to safeguard the interest of depositors and further enhance their trust in the country’s banking sector.

“Deposit protection facility is applicable to all the eligible depositors and does not require any further subscription or registration,” it said. “The guarantee amount or protected deposit is payable to eligible depositors only if the State Bank of Pakistan declares a bank as a failed entity and it is not payable under any other circumstances.”

Deposit Protection Corporation was launched in June 2018 to protect deposits of bank accountholders.

The protected amount was initially set at Rs250,000 per depositor per bank as envisaged in the Deposit Protection Corporation Act 2016. All commercial banks are members of this scheme and they are liable to pay the required premium.

The establishment of Deposit Protection Corporation was one of the most important objectives of SBP’s Strategic Plan 2016-20. It was part of the strategic goal of strengthening the financial system stability regime.

The corporation is a subsidiary and entirely owned by the SBP under the Deposit Protection Corporation Act. Its objective is to compensate small unsophisticated depositors to the extent of protected deposits in unlikely event.

Published in The Express Tribune, September 25^th, 2021.

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