The State Bank of Pakistan (SBP) has responded to reports suggesting that bank deposits above Rs500,000 in Pakistan are unsafe. The SBP stated that the deposits are safe due to the country’s strong banking system and the regulatory framework provided by the SBP. This comes after a statement by Deputy Governor Inayat Hussain, who said that only deposits up to Rs0.5 million are protected by the Deposit Protection Corporation (DPC), and amounts above this are not protected if a bank goes bankrupt. However, the SBP reassured the public that the banking system is sound and that there is an insurance cover of up to Rs500,000 provided by the DPC. The SBP also highlighted that the banking network is well-capitalized, liquid, and profitable, with a low level of bad loans. The profitability of the sector has increased in the first half of 2023, strengthening the capital of banks. The Capital Adequacy Ratio (CAR) of the banking sector has also increased, demonstrating its ability to withstand severe shocks. The central bank emphasized that deposit protection is an essential safety net used globally, and the troubled bank’s remaining deposits can be recovered through a regulatory process. Currently, 94% of depositors are fully protected under the Deposit Protection Act of 2016.
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