The State Bank of Pakistan (SBP) has recently unveiled the extent of legalprotection afforded to deposits held in commercial banks, as reported byARY News. During a briefing before the Senate Standing Committee on Financeand Revenue regarding the Deposits Protection Corporation (DPC), SBP DeputyGovernor Inayat Hussain disclosed that depositors’ funds are legallysafeguarded up to the value of Rs 500,000. However, he issued a cautionarynote, stating that should a bank face insolvency, depositors with balancesexceeding Rs 500,000 in their accounts would not be guaranteed compensation.
It is essential to note that the vast majority of account holders inPakistan are covered by the Deposits Protection Corporation (DPC), asInayat Hussain revealed that 94% of account holders maintain deposits ofless than Rs 0.5 million, while only 6% possess deposits surpassing thisthreshold.
To sustain its operations, the DPC relies on annual subscription feescollected from banks. Furthermore, Inayat Hussain emphasized that allscheduled banks operating in the country are mandated to be members of theDPC, ensuring that deposits within these institutions fall under theprotective umbrella of the deposit protection mechanism.
Regarding the challenge faced by Politically Exposed Persons (PEP) whenopening accounts, SBP officials explained that each bank has appointed afocal person to facilitate PEP during the account opening procedures.Additionally, the SBP has designated a focal person within the institutionto address queries related to account opening. SBP has also issueddirectives to banks to expedite these procedures, thereby streamlining theaccount opening process for PEP.
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In summary, the State Bank of Pakistan has outlined the legal protection ofdeposits in commercial banks, emphasizing the Rs 500,000 threshold and theimportance of membership in the Deposits Protection Corporation.
Furthermore, measures have been taken to alleviate the account openingchallenges faced by Politically Exposed Persons, including the appointmentof focal persons and streamlined procedures. These developments contributeto the overall financial security and accessibility of banking services inPakistan.
