Nearly 99 % Bank Depositors Are Protected: DPC Annual Report Discloses

Out of total 79.2 million depositors of scheduled banks, more than 78 million or 98.9 percent depositors are protected under deposit protection law while 93.4% enjoy full protection, the Deposit Protection Corporation’s fourth Annual Report for the fiscal year 2023-24 revealed on Friday

KARACHI, (UrduPoint / Pakistan Point News - 13th Dec, 2024) Out of total 79.2 million depositors of scheduled banks, more than 78 million or 98.9 percent depositors are protected under deposit protection law while 93.4% enjoy full protection, the Deposit Protection Corporation’s fourth Annual Report for the fiscal year 2023-24 revealed on Friday.

The volume of eligible deposits in member banks of the corporation climbed to Rs16.9 trillion by the end of June 2024 depicting 20% growth while the standing of Deposit Protection Corporation's (DPC) deposit protection Fund surged to Rs148 billion in the year, it added.

The DPC announced the release of its fourth Annual Report for the fiscal year ended June 2024 with the objective of providing complete disclosure of the Corporation’s financial performance, operating activities, and achievements, said a statement issued by the central bank.

The report revealed that, as of June 30, 2024, there exist 79.2 million depositors of scheduled banks, which included 64.8 million depositors of conventional banking system and 14.4 million of Islamic banking system.

The report stated that 78.3 million depositors are eligible for deposit protection in the unlikely event of a bank failure and its segment-wise analysis showed that 98.9% of conventional banking depositors and 98.6% of Islamic banking depositors were covered by the current deposit protection mechanism of the Corporation.

In terms of Section 7 of the DPC Act, 2016, the Corporation determines coverage limit or protected deposits from time to time. Currently, this limit has been set to cover up to Rs1 million or outstanding deposit balance, whichever is lower.

The report highlighted that the current deposit protection mechanism in Pakistan fully protects 93.4 percent of total domestic depositors of scheduled banks by the end June 2024.

Though a majority of depositors are being covered under existing deposit protection mechanism, a small number of depositors having large value of deposits are exposed to market discipline, the report clarified and added that 9.3% and 11.6% of conventional and Islamic banking deposits, respectively, are fully protected while in terms of numbers, 95.1% of conventional banking eligible depositors and 91.

7% of Islamic banking eligible depositors are fully protected.

The report indicates DPC’s robust deposit protection fund standing at total Rs148 billion. It is a testimony to DPC’s efforts towards fulfilling its mandate of compensating the losses incurred by the eligible depositors of any member bank in the unlikely event of its failure, it said.

As of June 30, 2024, domestic deposits held by member banks of the Corporation surpassed Rs31 trillion, of them conventional banking deposits stood at Rs23.8 trillion while Islamic banking deposits reached at Rs7.4 trillion, the annual report informed adding that on a year-on-year basis, total deposits experienced a robust growth of 22% during the fiscal year 2023-24, compared to 12% growth in the previous fiscal year.

The factors those contributed to the remarkable growth in deposits during FY 2023-24, as described in the report, are tight monetary policy stance and high interest rates, efforts to enhance financial inclusion, technological innovations, proliferation of mobile banking application and online banking platform and increase in foreign remittances channeled through the banking sector.

This surge in deposits directly impacted the volume of eligible deposits, which climbed to Rs16.9 trillion by the end of June 2024, up from Rs14 trillion in June 2023, showing 20 percent YoY rise. The breakup of eligible deposits further shows that Rs12.2 trillion is held in conventional banking, while Rs4.7 trillion in Islamic Banking accounts.

The DPC termed the significant growth in deposits as indication of increasing public trust in the banking sector, leading to a robust banking system in the country. DPC was established under the Deposit Protection Corporation Act, 2016 and operates as a subsidiary of the State Bank of Pakistan (SBP) with the mandate to compensate banks’ depositors in the unlikely event of any bank failure as and when notified by SBP.

The annual report of DPC for the year 2023-24 provides a graphical illustration of total and eligible deposits and the coverage ratio of banks’ depositors along with key features of deposit protection scheme and its targeted awareness campaigns and informative sessions conducted in various regions of the country.