Banks’ Deposit Rate Surges to All-Time High

The minimum deposit rate (MRD) or profit rate offered to customers by different commercial banks surged to an all-time high level of 18.5 percent subsequently after the recent upward revision of the policy rate by the State Bank of Pakistan (SBP).

The revised deposit rate is effective from the next day the monetary policy was announced. Banks will apply this rate from 1st April on the deposits of March 2023.

The increasing profit rate offered by banks on saving accounts and term finance certificates also attracts huge deposits from customers and investors who would receive up to Rs. 18,500 on an investment of Rs. 100,000 excluding various taxes and duties.

The deposit profit rates offered by conventional banks are higher than those provided by Islamic banks.

The overall deposits of the banking industry continued to surge due to MDR which generate higher profit rates for the customers. The overall deposits of the banking industry increased to around Rs. 22.75 trillion—the highest ever level. Besides saving accounts and investment certificates, multiple saving and investment products offered by different financial institutions also went up including mutual funds and National Savings.

These institutions also charge services and deduct the government’s tax on the overall gain depending upon the holding period of the customers and investors.

Pakistan’s savings-to-GDP ratio is lower than that of other countries in the region, hovering at nearly 10 percent. High rates of savings from individuals and institutions can benefit the economy in specific ways. However, this requires banks to offer lucrative profit rates to customers.

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