The deputy governor of the State Bank of Pakistan (SBP) has warned depositors that only amount up to Rs0.5 million (or 500,000 rupees) are legally protected in banks in Pakistan.
This means that if a bank fails, depositors with more than this amount in their accounts will not be guaranteed compensation.
In a briefing to the Senate Standing Committee on Finance on Wednesday, the deputy governor said that 94% of account holders in Pakistan have deposits of less than Rs0.5 million while only 6% have deposits of more than it.
This means that the vast majority of depositors in Pakistan are protected by the Deposits Protection Corporation (DPC) which is a subsidiary of the central bank.
The DPC collects subscription fees from banks every year to fund its operations.
In the event of a bank failure, the corporation will compensate depositors with up to Rs0.5 million.
The deputy governor urged depositors to be aware of the deposit protection scheme and the limits of protection.
What depositors can do
Depositors can take the following steps to protect their savings:
- Diversify their investments: Do not keep all of your money in one bank. Consider investing in other assets, such as government bonds, stocks, and real estate.
- Choose well-capitalized banks: Choose banks that have a strong financial position and a good track record of stability.
- Be aware of the deposit protection scheme: Understand the limits of deposit protection and what to do if your bank fails.