KARACHI: The State Bank of Pakistan (SBP) has reaffirmed the safety and soundness of Pakistan’s banking system, emphasizing the robust regulatory and supervisory framework in place. The SBP assures the public that all deposits are perfectly safe, with a layer of protection offered through insurance coverage.
The banking system in Pakistan is well capitalized, highly liquid, and profitable. Its ability to withstand severe shocks has improved significantly, and 94% of depositors are fully protected under the Deposit Protection Act 2016, according to a statement released by the central bank.
The SBP’s spokesperson clarified that certain media reports misinterpreted a statement made by Deputy Governor SBP, Dr. Inayat Hussain, during a meeting of the Senate Standing Committee on Finance and Revenue. The media implied that bank deposits above Rs500,000 could be unsafe in Pakistan’s banking system.
The SBP unequivocally states that deposits are secure due to the sound banking system in Pakistan, which operates under a robust regulatory and supervisory framework provided by the SBP. The sector is adequately capitalized, highly liquid, and profitable, with a low level of bad loans.
In the first half of CY23, the banking sector in Pakistan recorded a strong profitability of Rs284 billion, a 125% increase compared to the first half of CY22. Higher earnings have strengthened the capital of banks, with the Capital Adequacy Ratio (CAR) of the banking sector reaching 17.8% by the end of June 2023, surpassing the regulatory requirement of 11.5% and the international standard of 10.5%.
Moreover, Deposit Protection Corporation (DPC) adds another layer of protection by providing insurance coverage of up to Rs500,000 to every depositor, aligning with international best practices. Deposit protection is an important element of the safety net employed by supervisory authorities and deposit protection agencies worldwide to safeguard depositors’ funds in the unlikely event of a bank failure.
If a bank does fail, the insured amount through the DPC is immediately accessible to depositors, while the remaining deposit amounts can be recovered as the troubled bank is resolved through a regulatory-assisted process, the statement further clarified.