“Your bank deposits are safe,” SBP reassures

KARACHI: During a Senate Standing Committee on Finance and Revenue meeting yesterday, Deputy Governor of the State Bank of Pakistan (SBP), Dr. Inayat Hussain informed that the central bank offers insurance coverage of up to Rs 500,000 for each depositor in the event of a bank default.

However, this statement seemed to generate concerns among the general public, evident from the social media uproar that ensued, suggesting that bank deposits exceeding Rs 0.5 million in the Pakistani banking system might not be secure.

Gold prices in Pakistan show continuous decline

Responding to the growing apprehensions, the SBP took to social media on Thursday afternoon through their official account, stating, “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.”

1/2 #SBP clarifies that bank deposits are perfectly safe owing to a sound banking system in Pakistan under a robust regulatory and supervisory framework. See PR: https://t.co/zLD1B94RdO#SBPClarification pic.twitter.com/d6O2hu9Dun

— SBP (@StateBank_Pak) October 5, 2023

The accompanying press release issued by the central bank further elaborated, “In addition to the soundness of the banking system, the Deposit Protection Corporation (DPC) has added another layer of protection by providing insurance coverage of up to Rs 500,000 to every depositor.” The SBP emphasised that this aligns with international best practices and global trends.

The SBP clarified that the DPC ensures that the insured amount becomes immediately accessible to depositors in the unfortunate event of a bank failure.

It’s worth noting that government-backed deposit insurance is not a universal practice worldwide. The Rs 500,000 threshold represents the maximum limit of deposits covered by the DPC, which accounts for 94 percent of the total bank deposits in the country.