Deposit Protection Corporation Act, 2016

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  THE DEPOSIT PROTECTION CORPORATION ACT, 2016  
 
  CONTENTS   CHAPTER-I  PRELIMINARY  1. Short title, extent and commencement  2. Definitions  CHAPTER-II  ESTABLISHMENT AND OPERATION OF THE CORPORATION  3. Establishment of the Corporation  4. Corporation to be a subsidiary of the State Bank  5. Objectives of the Corporation  5A.  Member institutions of the Corporation   6. Business and functions of the Corporation  7. Protected deposits  8. Eligible depositors and exceptions  9. Share capital and limited liability  10. Board of directors  11. Chairman  12. Managing Director 

 
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13. Disqualifications of the directors 
 
14. Removal of a director 
 
15. Disclosure of interest 
 
16. Committees of directors 
 
17. Corporation's resources 
 
18. Financing the Corporation in shortfall of resources 
 
19. Investments made and accounts maintained by the Corporation 
 
20. Determining size of deposits 
 
21. Terms and procedures for reimbursement of protected deposits 
 
22. Priority of claims 
 
22A. Provision of financial support for resolution 
 
22B.  Terms and conditions for provision of financial support for resolution 
 
22C.  Modes for providing financial support for resolution 
 
23. Delegation of powers and appointment of attorneys 
 
24. Accounts and audit 
 
25. Power of the State Bank to give directions 
 
25A.  Coordination between the Corporation and the State Bank 
 
CHAPTER-III 
 
MISCELLANEOUS 
 
26. Duty of officers and servants to maintain secrecy 
 
27. Officers to be public officers 
 
28. Persons in service of the Corporation to be public servants 
 
29. Production of unpublished records of the Corporation, etc. 
 
30. Pension, gratuity, provident fund and other employment benefits of Corporation’s 
employees to be exempt from attachments, etc. 
 
 
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31. Exemption from taxes 
 
32. Power to make rules 
 
33. Power to make regulations 
 
34. Power to call information 
 
35. Protection of actions taken in good faith and indemnity 
 
36. Liquidation of the Corporation 
 
37. Act to override 
 
38. Removal of difficulties 
 
39. Removal of deposit protection under the Banks (Nationalization) Act, 1974 (XIX of 1974) 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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THE DEPOSIT PROTECTION CORPORATION ACT, 2016 
 
[12th August, 2016] 
 
ACT NO. XXXVII OF 2016 
 
An Act to provide for the establishment of Deposit Protection Corporation as a subsidiary of the 
State Bank of Pakistan and for the management and control thereof 
 
WHEREAS it is expedient to provide for the establishment, management and control of 
Deposit Protection Corporation as a subsidiary of the State Bank of Pakistan, for protection of 1[the 
depositors of member institutions, in order to contribute towards] financial stability of, and maintain 
public trust in, the financial system and for matters connected therewith or ancillary thereto; 
 
It is hereby enacted as follows:⸺  
 
CHAPTER-I 
 
PRELIMINARY 
 
1. Short title, extent and commencement.—(1) This Act may be called the Deposit Protection 
Corporation Act, 2016. 
 
(2) It extends to the whole of Pakistan.  
 
(3) It shall come into force at once. 
 
2. Definitions.—In this Act, unless there is anything repugnant in the subject or context,— 
 
(a)  “banking company” has the same meaning as defined in section 5 of the 
Banking Companies Ordinance, 1962 (LVII of 1962); 
 
(b)  “Board” means the Board of directors of the Corporation; 
 
1[(ba) "bridge institution" means bridge bank or any other entity established under 
section 42H of the Banking Companies Ordinance, 1962 (LVII of 1962);] 
 
(c)  “Chairman” means the Chairman of the Board; 
 
(d)  “Director” means a member of the Board; 
 
1[(da)   "eligible depositors” means such depositors as stated under sub-section (1) of 
section 8;] 
 
(e)  “Corporation” means the Deposit Protection Corporation established under 
sub-section (1) of section 3; 
 
(f)  “failed institution” means 1[a] member institution that 1[as such] by the State 
Bank under sub-section (1) of section 21; 
 
1Subs. and ins. by Act No. XXVII of 2024, ss. 2 & 3. 
 
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(g)  “Governor” means the Governor of the State Bank and includes an Acting 
Governor; 
 
(h)  “Managing Director” means the Managing Director appointed under section 12; 
 
(i)  “member institution” means a banking company or a financial institution which 
is notified by the Corporation as a member institution and which is required to 
pay premium to the Corporation under the provisions of this Act; 
 
1[(la) "resolution" refers to the process of exercising one or more of the resolution 
powers as provided in section 42E of the Banking Companies Ordinance, 1962 
(LVII of 1962), with a view to achieve the resolution objectives, including by 
ensuring the continuity of a member institution's critical functions, as specified 
by the State Bank;] 
 
(j)  “prescribed” means prescribed by rules or regulations made under this Act; 
 
(k)  “protected deposit” means the deposit protected under section 7, 1[***]; 
 
(l)  “regulations” means regulations made under this Act; 
 
(m)  “rules” means rules made under this Act; 
 
(n)  “seal” means the common seal of the Corporation; and 
 
(o)  “State Bank” means the State Bank of Pakistan established under the State Bank 
of Pakistan Act, 1956 (XXXIII of 1956). 
 
CHAPTER-II 
 
ESTABLISHMENT AND OPERATION OF THE CORPORATION 
 
3. Establishment of the Corporation.—(1) On the commencement of this Act, there shall be 
established a Corporation to be called Deposit Protection Corporation. 
 
(2) The Corporation shall be a body corporate having perpetual succession and a seal and shall 
by the said name sue and be sued. 
 
(3) The head office of the Corporation shall be situated in Karachi. It may shift the head office 
and establish offices in Pakistan with the prior approval, in writing, of the State Bank. 
 
4. Corporation to be a subsidiary of the State Bank.—The Corporation shall be a subsidiary 
of the State Bank. 
 
1[5. Objectives of the Corporation.—The objectives of the Corporation are to protect eligible 
depositors from losses to the extent of protected deposits and contribute to financial stability by 
reimbursing such deposits, in a failed institution and providing financial support for the resolution of 
a member institution.] 
 
1Ins., omitted and subs. by Act No. XXVII of 2024, ss.3 & 4. 
 
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1[5A. Member institutions of the Corporation.—All banks scheduled under sub-section (2) 
of section 37 of the State Bank of Pakistan Act, 1956 (XXXIII of 1956) and microfinance banks as 
defined under section 2 of the Microfinance Institutions Ordinance, 2001 (LV of 2001) unless 
exempted or excluded by the Board, shall compulsorily be member institutions of the Corporation and 
liable to pay the prescribed premium.] 
 
6. Business and functions of the Corporation.—The Corporation, under the overall 
supervision and control of the Board, may transact and carry on all or any of the following functions, 
namely:— 
 
(a)  collect premiums and contributions from member institutions and others; 
 
(b)  acquire, hold, manage and invest resources of the Corporation; 
 
(c)  receive grants and borrow moneys; 
 
(d)  assess and verify claims of the depositors made against the failed institution; 
 
(e)  make or cause to be made payments to the 1[eligible] depositors to the extent of 
protected deposits; 
 
(f)  recover payments made on account of protected deposits from the assets of 
failed institutions; 
 
(g)  incur any expenses concerning its functions; 
 
(h)  enter into any contracts or other arrangements or any financial or other 
transactions; 
 
(i)  issue guarantees and indemnities; 
 
(j)  purchase, hold, manage, lease, encumber, transfer and dispose of any property 
and assets; 
 
(k)  hire, employ or retain any person as an employee, agent or consultant on full 
time, temporary or on deputation basis and make necessary regulations for the 
terms and conditions of their service; 
 
(l)  create awareness among general public and depositors about the deposit 
protection scheme as contained in this Act; 1[*] 
 
(m)  carry on any business, discharge any functions and exercise powers as are 
necessary for, incidental to, or in connection with, affairs of the Corporation or 
any other act or deed deemed by the Board to be in the interest of the 
Corporation or for the advancement of the purposes of this Act 1[;] 
 
1[(n)  make or cause to be made payments for resolution of a member institution; 
 
 
1Ins., omitted, subs., and added by Act No. XXVII of 2024, ss.5 & 6. 
 
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(o) recover payments on account of financial support provided and costs incurred for 
resolution; and 
 
(p) enter into an agreement or memorandum of understanding or any reciprocal 
arrangement, with other deposit protection agencies, by whatever name called, or 
any domestic or foreign authorities responsible for the supervision, regulation or 
resolution of financial institutions or any other authority, in pursuance of its 
objectives, notwithstanding the provisions of any other law for the time being in 
force, and subject to measures the Corporation considers appropriate to protect the 
confidentiality of any non-public information:   
Provided that any agreement or memorandum of understanding or any reciprocal arrangement, 
with any foreign regulatory, supervisory or resolution authority under this clause, shall be carried out 
subject to the prior approval of the Federal Government.] 
 
7. Protected deposits.—(1) The Corporation shall guarantee 1[*] payment of funds held in 
1[an eligible] depositor’s accounts with a member institution, regardless of the number and size of the 
1[deposit accounts, up to an amount and in the manner as] prescribed by the Corporation from time to 
time. 
 
(2) The above amount shall be inclusive of any interest accrued or return due as at the date of 
the notification of the State Bank under sub-section (1) of section 21. 
 
(3) Shariah compliant mechanism of deposit protection in respect of 1[member institutions 
operating under Islamic mode of finance] shall be provided in the prescribed manner which shall be 
approved by the State Bank’s Shariah 1[Advisory Committee]. 
 
(4) Within ninety days of its commencement of business, the Corporation shall publish, in at 
least two daily newspapers having wide circulation, the 1[amount of protected deposit] as provided 
under sub-section (1). Any subsequent change in the 1[amount of protected deposit] shall be in same 
way published in two daily newspapers having wide circulation 1[and on the website of the 
Corporation]. 
 
8. 1[Eligible depositors and exceptions].—(1) 1[All depositors of the member institution, except 
for the following, shall be eligible depositors:] 
 
(a)  persons who have been granted preferential interest or return in deviation from 
the terms and conditions announced by a member institution which the member 
institution is obliged to apply to all its depositors of similar category; 
 
(b)  members of the Board of Directors and senior management of a member 
institution including chief executive officer and key executives; 
 
(c)  partners of auditing firms responsible to certify the member institutions’ 
financial statements; 
 
(d)  persons having acquired rights to a deposit after the issuance of the State Bank’s 
notification under sub-section (1) of section 21; 
 
1Omitted, ins., subs., and added by Act No. XXVII of 2024, ss. 7 & 8. 
 
 
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(e)  spouse, dependent lineal ascendants and descendants and dependent brothers 
and sisters of the persons specified in clauses (b), (c) and (d); 
 
(f)  any member institution whose deposits are in its name and on its account; 
 
(g)  government or government institutions; 1[or] 
 
(h)  any company as defined under the 1[Companies Act, 2017 (XIX of 2017), 
excluding a company registered as a single member company, Trust, Non- 
Governmental Organization or Non-profit Organization.] 
 
(i) 1 [* * * * *] 
 
1[(1A) The Board may exclude any other person or class of persons, institution or depositor 
from eligible depositors and any type of deposits or funds from protected deposits: 
 
Provided that such exclusions may be reviewed by the Board from time to time. Such decision 
shall be published by the Corporation in two daily newspapers having wide circulation and on the 
website of the Corporation.] 
 
(2) 1[The] deposits arising out of or related to transactions or actions constituting ‘money 
laundering’ within the meaning of the Anti-Money Laundering Act, 2010 (VII of 2010), if the offender 
has been convicted of such offence 1[, shall not be guaranteed under this law.]  
 
9. Share capital and limited liability.—(1) The authorized share capital of the Corporation 
shall be one billion rupees or such other amount as the State Bank may, from time to time, determine 
by order in writing and shall be divided into shares of one million rupees each. 
 
(2) The paid-up capital of the Corporation shall be such amount as may, from time to time, by 
order in writing be determined by the State Bank and contributed by the shareholders. 
 
(3) The share capital may be divided into different kinds and classes as may be prescribed. 
 
(4) The liability of shareholders of the Corporation shall be limited to the amount, if any, not 
fully paid-up on the shares held by them in the capital of the Corporation. 
 
(5) No dividend shall be payable to the shareholders of the Corporation. 
 
1[(6) An amount equal to the paid-up capital of the Corporation contributed under sub-section 
(2) shall always remain preserved and shall not be used for payment to eligible depositors or providing 
financial support for resolution or for any other purpose except for making investments as specified 
under section 19.] 
 
 
 
 
 
 
1Added, subs., omitted and ins. by Act No. XXVII of 2024, ss. 8 & 9. 
 
 
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10. Board of directors.—(1) The general superintendence, direction and management of 
affairs and business of the Corporation and overall policy making in respect of its operations shall vest 
in the Board which may exercise all such powers and do all such acts, deeds and things that may be 
exercised or done by the Corporation. 
 
(2) The Board shall consist of the following seven directors, namely:— 
 
(a)  a Deputy Governor of the State Bank as nominated by the State Bank; 
 
(b)  four directors to be appointed on nomination by the Federal Government in 
consultation with the State Bank, 1[***] from among the persons who have 
knowledge of banking, commerce, industry, economics, finance or law and 
neither of these directors shall be an officer of the Federal or a Provincial 
Government or of the State Bank or an employee or director or shareholder of 
the member institution; 
 
(c)  one director, an official of the Ministry of Finance, to be appointed on the 
recommendation of the Federal Government; and 
 
(d)  the Managing Director. 
 
(3) The directors appointed under clause (b) of sub-section (2) shall hold office for a term of 
three years and shall be eligible for re-appointment for an additional term of three years on the basis 
of their performance in the first term. 
 
(4) The meetings of the Board shall be held at such times and places as may be prescribed or, 
until so prescribed, as and when convened by the Chairman. 
 
(5) The directors shall be paid by the Corporation such fees and allowances for attending 
meetings of the Board or of any of its committees and for attending any other work of the Corporation 
as may be prescribed. 
 
(6) No act or proceedings of the Board shall be invalid merely on the ground of existence of 
any vacancy in, or defect in the constitution of, the Board. 
 
(7) The quorum of meetings of the Board shall be as may be prescribed or, until so prescribed, 
shall be three directors. 
 
(8) All decisions of the Board shall be taken by majority of the directors present and voting at 
a meeting duly convened and held and in the event of an equality of votes the Chairman may exercise 
a casting vote. 
 
(9) A resolution in writing signed by all directors shall be as effective as if such resolution had 
been passed at a meeting of the Board. 
 
(10) Till such time the Board is constituted or three months of the commencement of this Act, 
whichever is earlier, all powers of the Board shall vest in the State Bank. 
 
1Omitted by Act No. XXVII of 2024, s. 10. 
 
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11. Chairman.—(1) The Deputy Governor of the State Bank shall be the Chairman of the 
Board.  
 
(2) The Chairman shall, whenever present, preside over meetings of the Board. In absence of 
the Chairman, the directors present shall choose one of them to be the Chairman for such meeting. 
 
12. Managing Director.—(1) The State Bank shall appoint a professional person, who has 
significant experience in banking, finance, accountancy, business administration or public 
administration, as Managing Director of the Corporation for a term of five years and he shall be eligible 
for re-appointment for another term of five years on the basis of his performance in the first term: 
 
Provided that the Managing Director may delegate his powers, by general or special order in 
writing, to senior executive of the Corporation for managing day- to- day affairs during his leave period 
or absence from Pakistan: 
 
Provided further that if the office of Managing Director is vacant, the State Bank may appoint 
any of its senior executives as acting Managing Director for a period not exceeding three months. 
 
(2) The Managing Director shall be the chief executive officer of the Corporation and shall, 
subject to the control and direction of the Board, administer affairs of the Corporation and shall have 
such powers for this purpose as are from time to time delegated to him by the Board. 
 
(3) The salary and other terms and conditions of service of the Managing Director shall be such 
as the Board may determine except that neither the salary of the Managing Director nor his other terms 
and conditions of service shall be varied to his disadvantage after his appointment. 
 
(4) The Managing Director shall devote his full time and attention to affairs of the Corporation, 
provided that the Managing Director may, in addition to his duties as the Managing Director, be 
entrusted with such other duties for such period as the Board may, by order in writing, determine. 
 
13. Disqualifications of the directors.—No person shall be appointed or hold office as 
director who— 
 
(a)  is a member of the Senate, National Assembly, any Provincial Assembly or an 
elected member of a local council or local body constituted under any law 
relating to local councils or local bodies; 
 
(b)  is a director, officer or employee of any banking company or financial 
institution or has an interest as a shareholder in a banking company or financial 
institution: 
 
Provided that nothing in this clause shall apply where the director is in the employment of the, 
State Bank or its subsidiaries or where the director is, in addition to holding the office of director, 
entrusted with additional duties by the Board or State Bank; 
 
(c)  has been convicted of tax evasion under any law or has been convicted or 
proceedings are pending against him under section 412 of the Companies 
Ordinance, 1984 (XLVII of 1984) or section 83 of the Banking Companies 
Ordinance, 1962 (LVII of 1962) or has been convicted by a court of law for an 
offence involving moral turpitude; 
 
(d)  has been deprived of the right to hold a position of financial responsibility; 
 
 
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(e)  is in default of payments due from him to any banking company, financial 
institution, cooperative society, Government department, Government 
controlled or managed company or corporation and for the purpose of this 
clause, default in payment by the spouse, dependent children and companies, 
firms and other business concerns under the control or management of a person 
shall be considered as the default of such person; or  
  
(f)  holds an office in a political party. 
 
14. Removal of a director.—A director or the Managing Director may be removed by the 
State Bank by an order in writing where it is established that— 
 
(a)  any of the circumstances referred to in section 13 1[becomes] applicable; 
 
(b)  he has become physically or mentally incapable of carrying out his 
responsibilities for a continuous period of six months or more; 
 
(c)  he has been engaged in a serious misconduct; 
 
(d)  his activities impair the Corporation’s interests; 
 
(e)  he has been absent from three or more successive meetings of the Board without 
reasonable ground; or 
 
(f)  otherwise the State Bank considers him to be unfit to be a director or, as the 
case may be, Managing Director. 
 
15. Disclosure of interest.—(1) Every director and employee of the Corporation shall disclose 
in writing to the Board 1[and the Managing Director respectively,] any commercial, financial or other 
business interest which he or his family members may have, whether directly or indirectly, and which 
may have adverse implications for the Corporation’s interest. 
 
(2) In performing their obligations, the persons under sub-section (1) shall be bound to place 
the Corporation’s interests before their own interests. 
 
(3) Directors shall not participate in any discussion and shall restrain from voting on the issues 
in which their commercial, financial or other business interest, or those of their families, is involved. 
 
16. Committees of directors.—(1) The Board may constitute one or more committees 
consisting of such number of directors as it may determine. 
 
(2) The powers, functions, duties and other terms of appointment of a committee of directors 
shall be such as the Board may determine. 
 
(3) The members of a committee of directors shall hold office for such period as the Board may 
determine.   
(4) The minutes of every meeting of a committee of directors shall be presented before the 
Board at its next meeting following the meeting of the committee. 
 
1Subs. and ins. by Act No. XXVII of 2024, ss.11 & 12. 
 
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(5) Subject to general and any special directions of the Board, a committee of directors shall 
deal with any matter entrusted to it by the Board. 
 
17. Corporation’s resources.—(1) The sources of the Corporation’s resources shall, among 
others, consist of the following, namely:— 
 
(a)  the paid-up share capital; 
 
(b)  initial premiums from member institutions; 
 
(c)  periodic premiums from member institutions; 
 
(d)  return on the investments; 
 
1[(e)  proceeds received from resolution or winding-up of a member institution for 
claims arising out of payment to eligible depositors or financial support for 
resolution; or] 
 
(f)  other sources including loans, donations, grants and foreign assistance etc. 
 
18. Financing the Corporation in shortfall of resources.—(1) If at any time, resources of 
the Corporation fall short of its liabilities under this Act, such shortfall may be covered in one of the 
following ways, namely:— 
 
(a)  requiring member institutions to pay advance premium; 
 
(b)  increasing the premium; 
 
1[(ba)  interim loan or finance by the State Bank, on such terms and conditions as the 
State Bank may specify, subject to an irrevocable written guarantee of the 
Federal Government in favor of the State Bank to secure the repayment of the 
facility;] 
 
(c)  drawing loans in accordance with the terms and conditions prescribed by the 
Board; and 
 
(d)  allocations from the Federal Government. 
 
(2) The amount paid in advance under clause (a) of sub-section (1) shall be adjusted against 
future premiums. 
 
(3) The maximum amount of the increased premium contribution under clause (b) of 
sub-section (1) may not exceed such percentage of the deposit base as prescribed by the Board. 
 
(4) Loans drawn by the Corporation may be secured by a guarantee issued by the Federal 
Government, State Bank or by Corporation’s assets, including Corporation’s future claims on member 
institutions for premium contributions. 
 
1Subs. and ins. by Act No. XXVII of 2024, ss. 13 & 14. 
 
 
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19. Investments made and accounts maintained by the Corporation.—(1) The Corporation 
may invest in— 
 
(a)  Government securities issued or securities guaranteed by the Government; or 
 
(b)  any other investment avenue as approved by the Board: 
 
Provided that the Corporation shall formulate an investment policy within ninety days of its 
commencement of business. The investment policy shall be designed keeping in view objectives of 
the Corporation and in line with underlying factors like risks and liquidity. 
 
(2) The Corporation shall open and maintain account with SBP Banking Services Corporation 
or with any other financial institution with prior approval of the Board. 
 
20. Determining size of deposits.⸺(1)The total amount of a member institution’s liability to 
1[an eligible depositor] shall be determined by adding up all 1[the eligible depositor’s] deposits, 
including interest accrued or return due as at the date of notification under sub-section (1) of section 
21. 1[*****] 
 
(2) In the event of a joint deposit, each person’s portion shall be taken into account in 
establishing the total amount of that person’s deposits held by a member institution. If it is not 
otherwise provided for in the deposit contract, it shall be assumed that the depositors’ portions are 
equal. 
 
(3) In the event of a deposit contract in favour of a third party, the person in whose favour the 
deposit has been opened (the beneficiary) shall be entitled to receive a payment from the Corporation 
unless it is otherwise provided for in the contract. If there is more than one beneficiary, the joint 
depositor rule as provided in sub-section (2) shall apply. 
 
(4) A deposit which is encumbered or serves as collateral shall be included in the adding up 
under sub-section (1) and the amount due on the deposit shall not be paid to the titleholder of the 
deposit until the said encumbrance or security has been lifted. Where an order issued by a court in 
respect of such deposit is effective, the Corporation shall pay the amount due on the deposit to the 
person who is designated in the order as the person authorized to receive the deposit amount. 
 
1[21. Terms and procedures for reimbursement of protected deposits.⸺(1) The State Bank 
shall, by a notification to the Corporation, declare a member institution as a failed institution if:⸺ 
 
(a)  the State Bank has withdrawn the license of the member institution; or 
 
(b)  an order has been made by the High Court to wind up the member institution; 
or 
 
(c)  the State Bank has determined that the member institution is unable to pay its 
depositors. 
 
(2) The Corporation shall pay eligible depositors of the failed institution up to the amount 
protected, in the cases where the State Bank has issued a notification under sub-section (1). 
 
1Subs. & Omitted by Act No. XXVII of 2024, ss.15 & 16. 
 
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(3) The Corporation shall owe no interest or return on protected amounts. 
 
(4) The Corporation shall pay the amount of protected deposit in cash or through transfer to 
any banking company or in any other way as determined by the Board. 
 
(5) As soon as possible, after the issuance of notification under sub section (1), the Corporation 
shall collect necessary information and cause the same to be published in at least two daily newspapers 
having wide circulation and on the website of the Corporation, including information about the date 
after which eligible depositors shall be paid by the Corporation and the procedure for payments. 
 
(6) Payments from the Corporation to the eligible depositors shall begin as early as possible 
from the date of the notification under sub-section (1). The Corporation shall ensure that payments to 
most of the eligible depositors are made or tendered within seven working days and that all payments 
are made or tendered within thirty working days at the latest, if there is no dispute as to the entitlement 
to, or ownership of, the deposit or where such deposit is not withheld or blocked in accordance with 
any law for the time being in force or under any order of Court. 
 
(7) For foreign currency denominated deposits, the eligible depositor shall be paid the Rupee 
equivalent of the protected deposit amount at the exchange rate declared by the State Bank on the day 
of the notification under sub-section (1). 
 
(8) In order to ensure smooth payment of protected deposit to eligible depositors, the 
Corporation may⸺ 
 
(a)  request the State Bank to assist in utilizing the branch network and any other 
resources of the member institution, declared as failed under sub-section (1); 
 
(b)  request the liquidator appointed under section 51 of the Banking Companies 
Ordinance, 1962 (LVII of 1962), to-facilitate in reimbursement of protected 
deposits; 
 
(c)  engage one or more member institutions for making payment to eligible depositors; 
 
(d) issue necessary directives to the member institutions for making payments of 
protected deposits; and 
 
(e)  make payment directly to eligible depositors through bank draft or any other mode 
available. 
 
(9) A member institution's liability towards its eligible depositors shall be reduced 
proportionally by the amounts paid by the Corporation to them under sub-section (2) and shall be 
replaced by an equivalent liability to the Corporation. 
 
(10) A failed member institution shall be liable to the Corporation for an amount equal to any 
financial support provided under section 22A by the Corporation for its resolution and for any direct 
costs incurred by the Corporation for providing financial support or making payments to the eligible 
depositors. 
 
 
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(11) For the amount so paid by the Corporation to eligible depositors and to the extent of 
financial support provided for resolution, the Corporation shall assume and replace all rights of every 
such depositor including their priority rights under section 58 of the Banking Companies Ordinance, 
1962 (LVII of 1962).   
(12) The Corporation shall regularly notify the liquidator or the assignee in bankruptcy of the 
failed institution about the amount paid by the Corporation to any eligible depositor, any direct costs 
incurred and any financial support provided for the resolution of a member institution. 
 
(13) As and when requested by the Corporation, the liquidator of the failed institution or the 
bridge institution shall share information with the Corporation on all recoveries and proceeds received 
from sale of assets of that failed institution.] 
 
1[22. Priority of claims.—(1) Notwithstanding anything contained in the Companies Act, 2017 
(XIX of 2017), and any other law in respect of insolvency or liquidation or tax, the claim of the 
Corporation against the failed institution shall have priority over all unsecured claims under section 
58 of the Banking Companies Ordinance, 1962 (LVII of 1962) to the extent of: 
 
(a)   protected deposit paid or to be paid; 
 
(b)   financial support provided for resolution of the failed institution; 
 
(c)   any direct costs incurred for such payments and support; and 
 
(d)   any arrears of outstanding premium. 
 
(2) For the avoidance of doubt, it is clarified that payment to eligible depositors, to the extent 
of protected deposit, of a failed institution as declared under sub-section (1) of section 21 shall be 
made only through the Corporation.] 
 
1[22A. Provision of financial support for resolution.⸺In the event of resolution of a member 
institution under the provisions of the Banking Companies Ordinance, 1962 (LVII of 1962), the 
Corporation may provide financial support to facilitate the process of resolution, subject to the 
provisions laid down in sub-section (1) of section 22B, in accordance with the resolution scheme 
prepared by the State Bank and as per the procedures approved by the Board. 
 
22B. Terms and conditions for provision of financial support for resolution.⸺(1) No 
financial support shall be provided by the Corporation for resolution of a member institution unless 
the State Bank, based on its assessment shared with the Corporation, has concluded that: 
 
(a)  as a result of resolution, protected deposits shall be owed by a viable member 
institution; 
 
(b)  the resolution of the member institution requires financial support to be provided 
by the Corporation; 
 
(c)  as a result of resolution, holders of all classes of share capital and any subordinated 
debt have absorbed or will absorb the losses immediately before an order is made 
under section 42D of the Banking Companies Ordinance, 1962 (LVII of 1962); 
 
1Subs. and ins. by Act No. XXVII of 2024, ss.17 & 18. 
 
Page 16 of 21 
 
(d)  any financial support by the Corporation under sub-section (1) shall not exceed the 
estimated amount needed to reimburse eligible depositors under sub-section 2 of 
section 21 and any direct costs associated for such reimbursement: 
 
Provided that where all assets and liabilities of a member institution are transferred under a 
scheme of amalgamation, the estimated recoveries of the Corporation in the event of the winding-up 
of the member institution shall be deducted from the amount provided by the Corporation for such 
financial support. 
 
(2) Where the protected deposits have been transferred to a transferee institution or a bridge 
institution during resolution, the Corporation shall be deemed to have discharged its reimbursement 
obligations in relation to protected deposits in the member institution under resolution. 
 
22C. Modes for providing financial support for resolution.⸺(1) The Corporation may 
provide financial support, based on the valuation under sub-section (2) of section 42E of the Banking 
Companies Ordinance, 1962 (LVII of 1962), for resolution of a member institution by:⸺ 
 
(a) paying any difference between the assets and liabilities to be transferred to a 
transferee institution under a scheme of amalgamation, or to a bridge institution; 
 
(b)  issuing guarantees or providing indemnities for losses related to the transferred 
assets and liabilities under a scheme of amalgamation; 
 
(c)  paying any compensation under sub-section (7) of section 42E of the Banking 
Companies Ordinance, 1962 (LVII of 1962), to the extent arising because of any 
action taken by the State Banks to facilitate the transfer of protected deposits under 
a scheme of amalgamation; or 
 
(d)  contributing to the recapitalization of the member institution under a scheme of 
reconstruction, to the extent that protected deposits would have absorbed losses in 
line with their priority under section 58 of the Banking Companies Ordinance, 
1962 (LVII of 1962), if these deposits had not been part of exclusions under section 
42G of the Banking Companies Ordinance, 1962 (LVII of 1962). 
 
(2) In case the liquidator under the Banking Companies Ordinance, 1962 (LVII of 1962), has 
prepared a scheme to transfer the assets and liabilities of the member institution under liquidation to a 
transferee institution in terms of powers provided under sub-section (4) of section 51 of the Banking 
Companies Ordinance, 1962 (LVII of 1962), the Corporation may provide financing to the extent of 
difference between the assets and liabilities to be transferred to the transferee institution: 
 
Provided that⸺ 
 
(a)  the State Bank or its nominee has been appointed as official liquidator; 
 
(b)  the State Bank is of the view that scheme prepared by the liquidator will facilitate 
in protecting the interest of eligible depositors; 
 
(c)  protected deposits shall be owed by a member institution which State Bank 
considers as viable; 
 
(d)  reimbursement to eligible depositors has not yet been initiated; and 
 
Page 17 of 21 
 
(e)  financial support shall not exceed the estimated amount needed to reimburse the 
protected deposits under sub-section (2) of section 21 and any direct costs 
associated for such reimbursement net of expected recoveries.] 
 
23. Delegation of powers and appointment of attorneys.—(1) The Board may, for the 
purpose of ensuring smooth and efficient functioning of the Corporation and facilitating transactions 
of its daily business, by resolution, delegate to the Managing Director or any other executive of the 
Corporation, subject to such conditions and limitations, if any, as may be specified therein, such of its 
powers and duties under this Act as it may deem necessary. 
 
(2) The Board may, from time to time, by resolution appoint any company, firm or person to 
be the attorney of the Corporation for such purposes and with such powers, authorities and discretions, 
not exceeding those vested in or exercisable by the Board under this Act and for such period and 
subject to such conditions as the Board may think fit, and any such resolution may contain such 
provisions for the protection and convenience of persons dealing with any such attorney as the Board 
may think fit. 
 
24. Accounts and audit.—(1) The accounting year of the Corporation shall commence on the 
first day of July and end on the thirtieth day of June. 
 
(2) The Corporation shall maintain proper accounts and other records to reflect true and fair 
view of its state of affairs and prepare annual statement of accounts, including the profit and loss 
accounts and statement of financial position. 
 
(3) The accounts of the Corporation shall be audited by one or more auditors who shall be 
chartered accountants within the meaning of the Chartered Accountants Ordinance, 1961 (X of 1961), 
to be appointed by the Board. 
 
(4) Every auditor shall be supplied with a copy of the annual statement of accounts and it shall 
be the duty of the auditor to examine the same together with the accounts and vouchers relating thereto 
and every auditor shall have a list delivered to him of all books kept by the Corporation and shall, at 
all reasonable times, have access to books, accounts and other documents of the Corporation and may 
employ accountants or other persons to assist him in auditing such accounts and may, in relation to 
such accounts, examine the Managing Director, directors and executives of the Corporation. 
 
(5) The auditors shall submit a report to the Board regarding the annual statement of accounts 
and in any such report they shall state whether in their opinion the statement of accounts is a full and 
fair statement of accounts containing all necessary particulars and is properly drawn up so as to exhibit 
a true and correct view of the state of affairs of the Corporation and, in case they have called for any 
explanation or information from the Managing Director or the Board, whether it has been given and 
whether it is satisfactory. 
 
(6) The Board may, in addition to the audit under sub-sections (3) and (4), cause to be carried 
out internal audit of the Corporation’s accounts and the internal auditors' reports shall be submitted to 
the Board. 
 
25. Power of the State Bank to give directions.—(1) In order to protect interest of 1[*] 
depositors or ensure financial stability, where the State Bank is satisfied that,— 
 
1Omitted by Act No. XXVII of 2024, s. 19. 
 
Page 18 of 21 
 
(a)  in the public interest; or 
 
(b)  to prevent affairs of the Corporation being conducted in a manner detrimental 
to the interests of its beneficiaries or in a manner prejudicial to interests of the 
Corporation or of the State Bank; or 
 
(c)  to secure proper management of the Corporation generally or to further the 
objectives of this Act, 
 
it is necessary to issue directions to the Corporation, the State Bank may, from time to time, 
issue such directions as it may deem fit and the Corporation shall be bound to comply with such 
directions. 
 
(2) If any provision of this Act is contravened or if any default is made in complying with any 
requirement of this Act or of any rule or regulation, direction made or condition imposed there under, 
the State Bank may, on a complaint made in writing by the Corporation, or on its own motion, impose 
on the member institution and any other person who is knowingly a party to such contravention or 
default, a fine which may extend to two hundred thousand Rupees, and where a contravention or 
default is a continuing one, a further fine may be imposed which may extend to ten thousand Rupees 
for every day during which such contravention or default continues. 
 
(3) The State Bank may recover the amount of any outstanding premium or fine from a member 
institution by debiting its account maintained with the SBP Banking Services Corporation. 
 
(4) Any member institution or other person aggrieved by imposition of the fine under this 
section may, within twenty - one days from the date on which such decision is communicated to it, 
apply for review to the State Bank. 
 
(5) Any dispute as to the amount of premium due from any member institution shall be decided 
by the State Bank and the decision of the State Bank shall be final. 
 
1[25A. Coordination between the Corporation and the State Bank.⸺The Corporation and 
the State Bank shall with mutual consultation, establish a mechanism for information sharing and 
coordination.] 
 
CHAPTER-III 
 
MISCELLANEOUS 
 
26. Duty of officers and servants to maintain secrecy.⸺(1) Except in performance of his 
duties under this Act, every executive or other employee of the Corporation shall preserve and aid in 
preserving secrecy with regard to all matters relating to affairs of the Corporation and of the State Bank 
coming to his knowledge and not published by the Corporation or by the State Bank and with regard 
to all matters relating to financial or monetary affairs of any institution, person, body of persons, any 
Government or authority whether in Pakistan or outside Pakistan that may come to his knowledge in 
performance of his duties. 
 
 
1Ins. by Act No. XXVII of 2024, s. 20. 
 
 
Page 19 of 21 
 
(2) Every such executive or other employee who communicates any such matter, except when 
required by law so to do, or in discharge of his duties as such, shall be guilty of an offence punishable 
with imprisonment of either description for a term which may extend to three years, or with fine which 
may extend to one hundred thousand Rupees, or with both. 
 
(3) No court shall take cognizance of any offence punishable under this section except upon a 
complaint in writing by a person authorized in this behalf by the Board. 
 
27. Officers to be public officers.—(1) For the purposes of Article 7 of the 
Qanun­e­Shahadat, 1984 (P.O. No. 10 of 1984), the provisions of Part IV of the Code of Civil 
Procedure, 1908 (Act V of 1908), and the provisions of rule 27 of Order V, and rule 52 of Order XXI 
of the said Code any person in service of the Corporation acting in his capacity as such shall be deemed 
to be a public officer. 
 
(2) The provisions of Article 6 of the Qanun­e­Shahadat, 1984 (P.O. No. 10 of 1984), shall 
apply to the unpublished records of the Corporation and the Managing Director shall be deemed to be 
the officer or head of the department concerned. 
 
28. Persons in service of the Corporation to be public servants.⸺Every person in service 
of the Corporation shall be deemed to be a public servant within the meaning of section 21 of the 
Pakistan Penal Code (Act XLV of 1860). 
 
29. Production of unpublished records of the Corporation, etc.—(1) No court, tribunal or 
other authority shall be entitled to compel the Corporation or any person in service of the Corporation 
to produce or, as the case may be, give any evidence derived from, any unpublished records of the 
Corporation. 
 
(2) No court, tribunal or other authority shall permit any one to produce or give evidence 
derived from, any unpublished records of the Corporation, except with the prior permission in writing 
of the Managing Director who may give or withhold such permission as he thinks fit. 
 
(3) Notwithstanding anything contained in this Act or any other law for the time being in force, 
a report prepared by the Corporation on a member institution under any law for the time being in force 
shall be deemed to be unpublished for the purposes of sub-sections (1) and (2) even if a copy of such 
report has been supplied to the member institution to which the report pertains, the State Bank or the 
Federal Government. 
 
30. Pension, gratuity, provident fund and other employment benefits of Corporation’s 
employees to be exempt from attachments, etc.⸺Notwithstanding anything contained in any law 
for the time being in force, pensions, gratuity or provident fund and other employment benefits granted 
by the Corporation to its executives and other employees shall not be liable to seizure, attachment or 
sequestration by process of any court at the instance of a creditor, for any demand against the pensioner 
or in satisfaction of a decree or order of any such court. 
 
31. Exemption from taxes.⸺Notwithstanding anything contained in the Wealth Tax Act, 
1963 (XV of 1963), the Income Tax Ordinance, 2001 (XLIX of 2001), the Stamp Act, 1899 (II of 
1899) or any other law for the time being in force relating to wealth tax, income tax, super tax or any 
other tax, the Corporation shall not be liable to pay any wealth tax, income tax or super tax. 
 
 
Page 20 of 21 
 
32. Power to make rules.⸺The State Bank may, with approval of the Federal Government 
and by notification in the official Gazette, make rules, consistent with the provisions of this Act, for 
carrying out the purposes of this Act. 
 
33. Power to make regulations.—(1)The Board may make regulations, not inconsistent with 
the provisions of this Act and the rules made thereunder, to provide for all matters for which provision 
is necessary or convenient for the purpose of giving effect to the provisions of this Act. 
 
(2) Where any provision of the regulations is inconsistent with any provision of the rules, the 
provision of the rules shall prevail. 
 
(3) Where the State Bank considers it expedient so to do, it may by order in writing, direct the 
Board to make any regulations or to amend or rescind any regulations already made, within such period 
as it may specify in this behalf. 
 
(4) If the Board fails to comply with any direction of the State Bank under sub-section (3) 
within the specified period, the State Bank may make, amend or rescind any regulation directed by the 
State Bank to be made, amended or rescinded, and a regulation so made, amended or rescinded by the 
State Bank shall be deemed to have been made, amended or rescinded by the Board in accordance with 
the provisions of this section and shall have effect accordingly. 
 
34. Power to call information.—(1) The Corporation may call for any record or information 
from any member institution 1[or conduct visits to review such information] as it may deem necessary 
for discharging its functions under this Act. 
 
(2) The Corporation shall report to the State Bank in case any member institution fails to 
provide information or record required under sub-section (1) or comply with any provisions of this 
Act or any rules or regulations made under this Act and the State Bank may take any action corrective, 
penal or remedial against such member institution as it may deem appropriate keeping in view the 
nature and extent of failure. 
 
1[35. Protection of actions taken in good faith and indemnity.⸺(1) No suit, prosecution or 
any other legal proceedings including compensation for damages shall lie against the Corporation, its 
Chairman, Managing Director, Board of Directors or members thereof and officers and employees of 
the Corporation for any act of commission or omission done in exercise or performance of any 
functions, power or duty conferred or imposed by or under this Act upon such persons or any rules 
and regulations made thereunder, unless such act of commission or omission is proven beyond 
reasonable doubt to have been done in bad faith and with mala fide intent. 
 
(2) The Chairman, Managing Director, Directors, members of any Board committee and 
officers and employees of the Corporation shall not be liable in their personal capacity for any act of 
commission or omission undertaken in their official capacity in good faith. In case of any such 
proceedings as mentioned in sub-section (1), they shall be indemnified by the Corporation which shall 
bear all the expenses thereof, unless an act or omission has been subsequently determined to have been 
undertaken in bad faith and with mala fide intent.] 
 
36. Liquidation of the Corporation.⸺(1) The Corporation shall not be placed in liquidation 
save by order of the State Bank and in such manner as the State Bank may direct. 
 
(2) On the liquidation of the Corporation,— 
 
1Ins. and subs. by Act No. XXVII of 2024, ss. 21 & 22. 
 
Page 21 of 21 
 
(a)  the outstanding assets of the Corporation shall be distributed among the member 
institutions in such manner and in such proportion as may be determined by the 
State Bank having regard to the amounts of premium paid by them during any 
prescribed period or the deposits of the said 1[institutions] as on the date of 
liquidation of the Corporation or other relevant circumstances; and 
 
(b)  the remaining outstanding assets of the Corporation shall be transferred to the 
State Bank. 
 
37. Act to override.⸺Except the application of any provision of the Act to the Corporation as 
a subsidiary of the State Bank, this Act shall have effect notwithstanding anything contained in any 
law for the time being in force or in any agreement, contract, or other applicable documents or 
instrument. 
 
38. Removal of difficulties.⸺If any difficulty arises in giving effect to any of the provisions 
of this Act, the State Bank may make such order not inconsistent with the provisions of this Act, as 
may appear to it to be necessary for the purposes of removing the difficulty: 
 
Provided that aforesaid power shall cease to exist on expiry of two years, from the 
commencement of this Act. 
 
39. Removal of deposit protection under the Banks (Nationalization) Act, 1974 (XIX of 
1974).⸺Sub-section (4) of section 5 of the Banks (Nationalization) Act, 1974 (XIX of 1974) shall not 
be applicable to any member institution. 
 
 
__________ 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RGN Date: 03-12-2024 
1Subs. by Act No. XXVII of 2024, s. 23.