October 05, 2023 (MLN): The State Bank of Pakistan (SBP) has refuted claims suggesting that deposits exceeding Rs500,000 in the country's banking system are unsafe and ensured the safety of all deposits due to Pakistan's strong banking system and robust regulatory framework, as per a press statement issued by the Central bank.
Certain sections of the media, on the basis of a statement given by Deputy Governor of State Bank of Pakistan(SBP), Dr. Inayat Hussain during the meeting of the Senate Standing Committee on Finance and Revenue, are implying bank deposits above Rs500,000 in the banking system in Pakistan are unsafe.
The banking system in Pakistan is adequately capitalized, highly liquid, and profitable with a low level of net non-performing loans, i.e. bad loans.
The sector posted a strong profitability of Rs284 billion in the first half of CY23, which is almost 125% higher than the first half of CY22.
The higher earnings, in turn, also strengthened the capital of banks and the Capital Adequacy Ratio (CAR) of the banking sector increased to 17.8% by the end of June 2023 compared to 16.1% as of the end of June 2022, substantially higher than SBP’s minimum regulatory requirement of 11.5% and international standard of 10.5%.
With improvement in solvency buffers, the ability of the banking sector to withstand a set of severe shocks has further improved.
In addition to the soundness of the banking system, Deposit Protection Corporation (DPC) has added another layer of protection by providing insurance cover of up to Rs500,000 to every depositor.
This is in line with the best international practices and global trends. Deposit protection is one of the key elements of the safety net used by supervisory authorities and deposit protection agencies around the world to provide protection to the depositors’ funds in the unlikely event of a bank failure.
The amount insured by the DPC becomes immediately available to depositors in case a bank fails.
Nevertheless, the remaining amounts of the deposits are also recoverable as the troubled bank is resolved through a regulatory-assisted process.
Currently, 94% of the depositors are fully protected under the Deposit Protection Act of 2016.
Copyright Mettis Link News
Posted on:2023-10-05T13:04:04+05:00
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