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To ensure its availability and service reliability, a capacitor bank requires thorough protection that will result in minimal damage to the bank and ultimately to the power system. A faulty bank should be removed from the system before it is exposed to severe damage or before a fault is established on the system. Normal capacitor bank protections should include individual unit overcurrent protection, overcurrent protection, rack faults protection, and overvoltage protection. IEEE C37.99-1990 indicates that the present protection schemes, especially for double-Y banks, are not very effective for rack faults. The proposed protection scheme in this paper has a novel approach to the protection of the capacitor banks. It modifies the impedance relay scheme to achieve the capacitor bank protection function with reliability. The discussions and results presented in this paper can be applied for both single- and double-Y capacitor banks.