In power systems, capacitor banks play a significant role in improving voltage profiles, reducing losses, and adjusting power factors. Security measures must be implemented quickly and reliably to protect them from a wide range of threats. As a consequence of capacitor bank failures, finding and fixing the damaged units/elements is more difficult, which may lead to voltage control difficulties or the loss of any of these benefits. The paper shows the application of system-based testing methods for protection systems using RelaySimTest software, which works with OMICRON injection test sets. System-based testing methods are applied to test voltage differential protection for center-tapped shunt capacitor banks. The use of system-based testing methods has many advantages over conventional testing methods, which include distributed testing, transient state conditions testing, etc., which in turn result in cost savings during the commissioning and testing phase. The impact of external faults on bank installation has been tested successfully.