SBP initiates reimbursements to depositors of defunct SME
Bank
The Deposit Protection Corporation (DPC), a subsidiary of
the State Bank of Pakistan (SBP), has initiated the reimbursement process for
depositors of the defunct SME Bank, as revealed in the DPC's annual report
released on Friday. The move aims to safeguard depositor interests and maintain
stability in the financial system.
According to the 2022–2023 report, the DPC began reimbursing
eligible depositors of SME Bank based on the Single Depositor View (SDV)
database provided by SME Bank. This allowed the DPC to efficiently determine
eligibility and facilitate payouts to depositors up to the protected amount.
SME
Bank faces imminent closure
The report highlighted the pivotal role played by the SDV
database in shortening the turnaround time for reimbursing eligible depositors.
Payouts are executed based on claims received from SME Bank, and the protected
deposit amount, up to Rs500,000, is claimed from the DPC and subsequently
reimbursed to SME Bank after due verification.
While acknowledging the distress faced by depositors in the
event of a small bank failure, the report emphasized that an efficient and
well-functioning deposit insurance system serves as a crucial financial safety
net.
The report emphasized the importance of meticulous planning,
quick action, and clear communication by stakeholders, including the DPC, in
ensuring the stability and integrity of the banking system. It acknowledged
ongoing challenges in adapting to the ever-evolving landscape of financial
products and economic conditions.
ICCI
advocates the revival of SME Bank to support the SME sector
The winding down plan for SME Bank was approved by the
government last year due to insufficient capital and liquidity. The SBP
declared SME Bank a failed institution in May 2023, leading to the DPC's public
announcement for eligible depositors to claim their balances.
The DPC's report revealed that it provides deposit
protection to over 98 percent of the total 73 million depositors in scheduled
banks in Pakistan. It also noted a significant increase in deposits with DPC's
member banks, reaching an all-time high of Rs25.6 trillion by the end of June
2023. However, the report highlighted a year-on-year deceleration in deposit
mobilization during FY2023, attributed to factors such as macroeconomic
uncertainty and a slowdown in foreign remittances.
As of June 30, 2023, the report indicated that a high
percentage of total depositors in conventional and Islamic banking are eligible
for deposit protection in case of a bank failure. The coverage percentages for
eligible deposits underscore the distribution of deposits in Pakistan's banking
industry, with a focus on protecting smaller and financially unsophisticated
depositors.
Source: The News