The State Bank of Pakistan on Thursday clarified that customer deposits are “perfectly safe” owing to the sound banking system in Pakistan.  

The clarification by the central bank comes following reports in certain sections of the media that implied bank deposits above Rs500,000 in the banking system were unsafe.

The SBP added that the Deposit Protection Corporation (DPC), a subsidiary of SBP, has added another layer of protection by providing insurance cover of up to Rs500,000 to every depositor.

Read: SBP launches Deposit Protection Corporation

“Deposit protection is one of the key elements of 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 statement from the central bank further stated that 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.”

On Wednesday, SBP Deputy Governor Inayat Hussain, speaking in a Senate Standing Committee on Finance and Revenue meeting, said funds of depositors had legal protection worth Rs500,000 under the DPC

He said earlier its limit was Rs250,000 and the said amount limit fully covers 94 per cent of the depositors under the SBP subsidiary DPC.

The deputy governor said that all scheduled banks operating in the country were required to be members of the DPC to ensure the deposits in the banks come under the umbrella of the deposit protection mechanism.