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Deposits above Rs.0.5M are not protected in case of bankruptcy

ISLAMABAD: (Eshfak Mughal). The Deputy Governor State Bank, Dr Anait Hussain revealed that the State Bank doesn’t insured above from Rs.500,000 deposits to any account holder in case of bankruptcy of their bank.

He was giving briefing to the Senate Standing Committee on Finance and Revenue. The Committee met under the chairmanship of Saleem Mandiviwala here in Parliament on Wednesday.

While responding to the the committee members, Dr Anait said that the State Bank doesn’t provide protection to whole amount of deposits in bank account in case of bankruptcy or failure of any banks. He said the protection limit of any bank account holder up to deposit of Rs,0.5 million. The Central Bank will not pay above from Rs.500 thousands to any account holder if his or her bank is bankrupted or failed, he said. He said that the protected line was only Rs50 thousands but gradually increased up to Rs.500 thousands.

The Deputy Governor said that the Depository Protection Corporation, a subsidiary organization of the State Bank looks the matter and pays to the account holder of the bank which goes bankrupt or close.

Senator Saleem Mandviwalla questioned whether the deposit is being protected by SBP or not.


Dr Anait told the committee that only 6% of account holders in Pakistan who have deposits above Rs 0.5 million however he said that no depositor has lost their money in the financial history of the country. He said the Central Bank is going to introduce Pay Box Plus law to deal the matter in case of bankruptcy of any bank in the country.

The Senate Committee also deliberated on high interest and its impact on the business community.

Senator Zeeshan Khanzada remarked that the unreasonable increase in interest has made it difficult for businesses to sustain, let alone growth.

Deputy Governor SBP, Dr. Inayat Hussain, apprised that the interest rate has been increased to control the rising inflation and it has bear significant results in the past few months.

Senator Saleem Mandviwalla posed a question as to how the interest can be effective in controlling the growing inflation. Has inflation been reduced by increasing interest rates? Tell me how much benefit has been achieved so far.

He said that 22 percent interest rate would be beneficial in a developing country like Pakistan adding that the Chairman Committee said that Deposits have increased to Rs 26 trillion due to increase in interest rates and these Rs 26 trillion should have been in the market instead of deposits.

Senator Dilwar said that Inflation rate reached a record level in the country and factories have been closed due to interest rate.

The Deputy Governor of the State Bank claimed that the Central bank has taken the measures due to which inflation has reduced. Prices of food items have seen a decline in recent weeks adding that a decrease in sugar prices has been observed, he added.

Inflation rate had crossed a record 38 percent but in August, the inflation rate reached 27%, added the Deputy Governor State Bank. He further said that the reasons for the increase in inflation in September were explained in the monetary policy.

The committee directed the State Bank to submit a comprehensive report in this regard.

The Committee was briefed on difficulties confronted by Political exposed persons (PEP) in availing the financial services. Deputy Governor SBP stated that the system is in place wherein a focal person has been deputed in every branch to sort such issues, however, the system has failed to provide desirable results due to unknown reasons.

The Committee recommended to sensitize all banks to make the dedicated PEP officers in all commercial banks, designated on the direction of this committee earlier.

Moreover, the Senate body discussed the causes of reported low scores of Pakistan’s banks in terms of their human rights policies. Representatives from Fair Finance Pakistan emphasized that Fair Finance is committed to ensure that financial institutions in Pakistan prioritize the social and environmental welfare of local communities. They highlighted the need for Pakistan to embrace a Green Banking policy that incorporates environmental and social concerns into financial operations.

The Deputy Governor of the State Bank of Pakistan (SBP) mentioned that SBP is making dedicated efforts to align with international standards, aiming to improve the well-being of individuals.

While deliberating on massive money laundering by solar panel importers, Member Customs apprised that seven companies have been identified who were involved in money laundering and six FIRs have also been registered against them.

Senator Saleem Mandviwalla remarked that Solar panel importers have succeeded in laundering 69 Billion Rupees in last five years but the FBR didn’t notice any suspicion and above all 25 Billion rupees were deposited in two different accounts without facing any queries. He directed the FBR to conduct an inquiry of the matter and submit its report before the committee.

Furthermore, the senate committee has taken up the matter of reportedly Rs. 5 billion fraud in Bank Al-Habib Faisalabad.

Dr. Inayat Hussain, Deputy Governor SBP, apprised that the incident resulted due to uncertain mutual trust between the bank officials and the aggrieved party, which forced the aggrieved party to perform their transactions outside the place of business.

The SBP is in coordination with both the parties and the matter will be resolved soon. The Committee directed the SBP to start an awareness campaign stating that ” Don’t Transactions with Banks outside the Banks” so that any future incidents could be avoided.

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