KARACHI: The State Bank of Pakistan (SBP) is working on a scheme to minimize the risk to the money of the depositors as reports of account holders lost their money after the collapse of giant banks in the West made headlines.
Sources in the banking industry said that the depositor protection scheme would be sort of an insurance scheme.
“The proposal for protection of depositors’ money has been under consideration for the last few years, but no concrete shape of such scheme could be developed so far,” said a senior banker.
Former State Bank governor Dr Shamshad Akhtar had also proposed a deposit insurance scheme but could not finalise it.
“I believe that the State Bank is finalizing the depositor protection scheme which could be launched this year,” the banker said.
According to the proposal of Dr Shamshad Akhtar, bank deposits below Rs100,000 should be insured, which means over 70 per cent account holders could get insurance coverage, though the value of these accounts would be much less compared to big account holders’ deposits.
Bankers said the insecurity among the depositors was rising after the failure of hundreds of banks in the US and other developed countries.He added that the failure of some giant US and European banks also shattered the depositors’ confidence in developing countries like Pakistan.
The local big banks had been facing trouble in attracting fresh deposits since the start of 2009, while the smaller banks were in serious problem as they were rated ‘risky banks’ forcing them to raise costly deposits.
Most of the small banks failed to meet the paid-up capital requirements of the State Bank.
“If insurance cover is provided for the account holders, it could certainly improve the situation for both the banks and the depositors,” said Abid Saleem, an analyst.
He said the current year may see more mergers and acquisitions as a number of small banks were in trouble to continue their operations and looking for buyers at better prices.
“The small depositors are the real account holders of the banks despite lower value but their participation and operations of accounts enable banks to earn money,” said Abid.
However, he said most of the banks failed to improve the deposit base, which is essential for development and growth of the banking industry. The small banks were particularly victim of this odd situation.

Bankers said they would welcome such scheme for the protection of depositors which would ultimately help banks.