Govt notifies Deposit Protection Corporation Act 2016

KARACHI: The government has enacted the Deposit Protection Corporation Act, 2016 to set-up Deposit Protection Corporation to protect small depositors from losses in case of financial institution’s failure.  

The proposed corporation will be a subsidiary of the State Bank of Pakistan (SBP). The central bank on Monday  informed commercial banks the enactment of the Act.

The corporation would safeguard the interest of the depositors and would compensate them for any possible losses to the extent of protected deposits.  The Act said all banks should compulsorily be member institutions of the corporation and “liable to  pay the prescribed premium.”

“The corporation under the overall supervision and control of the board may transact and carry on collect premiums and contributions from member institutions and others and acquire, hold, manage and invest resources of the corporation,” it added.  

“Total amount of a member institution’s liability to a depositors shall be determined by adding up all the depositor’s deposits, including interest accrued or return due as at the date of notification.”

Meanwhile, the government also notified the Financial Institutions -- Recovery of Finances (Amendment) Act, 2016. It said a financial institution can file a suit for the recovery of any amount written-off, released or adjusted under any arrangement within in a five years period.