Over 98% Banks Depositors Are Protected in Pakistan: DPC Annual Report

Deposit Protection Corporation (DPC) has made a great stride and enhanced its coverage or protections to over 98 percent of customers of banks, who maintain their deposits of money in conventional and Islamic banks in Pakistan, since the commencement of its operation in 2018.

The coverage provided by the corporation mainly covers small depositors. As of December 31, 2020, 98.9 percent of total depositors of conventional banking and 98.5 percent of Islamic banking depositors are eligible for deposit protection from DPC in case their bank is declared to have failed by the SBP, said Deposit Protection Corporation (DPC) first annual report.

In terms of the overall volume of deposits as of December 31, 2020, 18 percent of the conventional banking eligible deposits and 13 percent of the Islamic banking eligible deposits are fully protected. It merits mentioning here that the core responsibility of the DPC is to compensate the depositors for their losses in the event of a bank failure, as provided in the Deposit Protection Corporation Act, 2016.

This annual report is issued on the back of enhancement of coverage amount to Rs. 500,000 per depositor-per bank from Rs. 250,000 prevalent earlier. This 100 percent increase in coverage amount is expected to benefit individual depositors and has also resulted in an increased number of fully protected depositors. The better coverage to depositors is expected to further enhance the depositors’ trust in the country’s financial system to contribute more towards strengthening financial stability.

As the concept of explicit and limited deposit protection is still novel in Pakistan, therefore, the report tries to educate the readers with basic ideas about deposit protection. It sensitizes its readers on the concepts of single depositor view (SDV) and fixed-rate and risk-based premium systems. Additionally, the report provides statistics about coverage of deposits and premium collection and also throws light on the risk management framework at DPC.

The corporation plans to make such reports a regular annual feature henceforth, to regularly disseminate information on its developments and performance to the public and other relevant stakeholders.

The annual report highlights significant developments made in the areas of deposit protection framework, corporate governance, and public awareness, and also includes the financial statement of the corporation for FY2021.

The reports also show that the number of depositors covered under the protection offered by the corporation has increased due to a healthy growth trend in bank deposits, which further swelled and reached an all-time high of PKR 20 trillion in FY21.

Importantly, detailed Frequently Asked Questions (FAQs) are also part of the report for easy understanding of the deposit protection mechanism. Being the first such report issued by the DPC, it attempts to cover all substantial developments since the commencement of its business in June 2018.

According to Deposit Protection Corporation Act, 2016, all 33 scheduled banks in Pakistan are member banks of the deposit protection schemes under DPC. Out of the total of 33 member banks, there are four foreign banks, four specialized banks, 20 private sector banks, and five public sector banks.

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