SBP says 98.9pc bank savers eligible for deposit protection

KARACHI: The State Bank of Pakistan (SBP) said on Friday that 78.3 million, or 98.9 per cent of depositors are eligible for deposit protection in the unlikely event of a bank failure.

The Deposit Protection Corporation (DPC), a subsidiary of the SBP, released its fourth annual report for the fiscal year ending June 30, 2024. According to the report, the corporation’s protection fund reached a total of Rs148 billion, highlighting its efforts to compensate eligible depositors in the event of a member bank’s failure. This underscores the DPC’s role in promoting financial stability in Pakistan.

As of June 30, 2024, there were 79.2 million depositors across member banks, including 64.8 million in the conventional banking system and 14.4 million in the Islamic banking system. Of these depositors, 78.3 million, or 98.9 per cent, qualified for deposit protection. Deposits held by banks exceeded Rs31 trillion as of June 3, 2024, with conventional banking deposits at Rs23.8 trillion and Islamic banking deposits at Rs7.4 trillion. Year-on-year (YoY), total deposits experienced the robust growth of 22 per cent during FY24, compared to 12 per cent in the previous year.

This surge in deposits had a direct impact on the volume of eligible deposits, which rose to Rs16.9 trillion by the end of June 2024, up from Rs14 trillion in June 2023, reflecting a 20 per cent YoY increase.

This significant growth in deposits indicates an increasing public trust in the banking sector, leading to a stronger banking system in the country, according to the report.Several factors contributed to this remarkable growth in deposits. A key driver was the tight monetary policy stance during FY24, which maintained elevated interest rates to combat inflation, according to the report.

The corporation achieved a significant investment portfolio of Rs148 billion by the end of June 2024, showing a remarkable 48 per cent growth over the previous year. Notably, total income during 2023-24 increased substantially by Rs48 billion, which includes Rs26 billion earned from a prudently managed investment portfolio and Rs22 billion collected through premiums from member banks.

The report also noted that by the end of June 2024, more than 92 per cent of the protected deposits from SME Banks had been paid out. SME Bank was wound down with government approval and declared failed by the SBP under Section 21 of the Deposit Protection Corporation Act, 2016.