State Bank warns about limit of deposit protection at banks
The State Bank of Pakistan (SBP) has issued a cautionary
statement, indicating that deposits exceeding 500,000 rupees do not enjoy legal protection within the country's banking system.
This implies that in the event of a bank's failure, depositors holding balances exceeding this threshold will not be assured compensation.
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During a briefing to the Senate Standing Committee on Finance, the Deputy Governor of the State Bank shared that a substantial 94% of account holders in Pakistan maintain deposits below 500,000 rupees, while merely 6% hold amounts exceeding this limit.
Consequently, the majority of depositors in Pakistan fall under the protection of the Deposits Protection Corporation (DPC), a subsidiary of the central bank. The DPC sustains its operations by collecting annual subscription fees from banks.
In the unfortunate scenario of a bank's collapse, the DPC will provide compensation to depositors for amounts up to 500,000 rupees.
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The Deputy Governor urged depositors to familiarize themselves with the deposit protection scheme and its limitations.
To safeguard their savings, depositors can take the following measures:
Diversify their investments:
Avoid concentrating all funds in a single bank and consider investing in
alternative assets like government bonds, stocks, or real estate.
Choose well-capitalized banks:
Opt for financial institutions with robust financial standings and a history of
stability.
Stay informed about the deposit
protection scheme: Understand the extent of deposit protection and the
appropriate actions to take should your bank face difficulties.
Source: Samaa TV