RECENTLY I received a message from my bank to the effect that my deposits `are now protected under State Bank`s deposit protection mechanism`. The message also mentioned a website address `for more info`. On accessing the website, I found the following: `Deposit Protection Corporation (DPC) is a wholly-owned subsidiary of the State Bank of Pakistan and [was] established in the wake of the DPC Act 2016. The corporation commenced its business with ef fect from June 1, 2018 ...

The objective of DPC is to compensate the small and financially unsophisticated depositors to the extent of protected deposits in the unlikely event of a bank failure.

It is a good initiative in line with international practices, like Financial Services Compensation Scheme (FSCS)in the United Kingdom and the Federal Deposit Insurance Corporation (FDIC)in the United States.

However, in both the countries these schemes function independently, whereas in Pakistan, DPC is a wholly-owned subsidiary of the SBP.

The scope of this service, which has been prevalent abroad since the last many decades, covers a large spectrum of risk where public funds are involved and is not restricted to bank f ailure only.

If such an authority/corporation had existed earlier in Pakistan, I am sure the poor and innocent depositors/investors in the cooperative banks/societies, modarabas, and the fraudulent schemes would not have lost their life savings and suffered at the hands of unscrupulous, dubious institutions and influential people.

So, would it not be a good proposition that the DPC operates as an independent entity and its scope covers all areas where public funds are being mobilised? To assist in its smooth functioning, a dedicated intelhgence/vigilance cellcan be put under its ambit.

The risk protection is an added advantage to gain customer confidence and adds more credibility to the bank.

Surprisingly, the information about DPC has been intimated to its clients individually by a foreign bank only through a text message. The gesture needs to be appreciated.In the Western world, this service is publicly exhibited and individually mailed to the customers for information.

This not only helps the consumers to decide which bank to opt for in terms of better safety measures, but it also develops a sense of trust in the minds of the customers for the relevant institution, thereby giving the financial institutions a competitive edge.

Muhammad K. Sufi Islamabad