More money is coming from the public towards banks as the deposits of the banking industry have reached all-time high level by the end of 2018 to stand at Rs. 13.3 trillion in spite of low-profit rates offered by commercial and Islamic banks on saving accounts and products.
According to data updated by State Bank of Pakistan (SBP), the deposits value of the overall industry increased to Rs. 13.35 trillion by end of 2018 as against of Rs. 12.361 trillion recorded by end of 2017, showing an increase of Rs. 992 billion in the outgoing year.
The deposit mobilization of the commercial banks saw a slow down with a drop of 14 percent compared with 2017 in which banks’ deposits grew to 1.158 trillion to reach Rs. 12.36 trillion. This showed banks deposits were lesser of over Rs. 166 billion in 2018 from its previous year.
It is pertinent to mention here the deposit rates have increased over the period with the increase of policy rates announced by the central bank.
The average profit rate on saving accounts and products offered by banks increased gradually with the interest rates to stand over 6 percent in 2018-end. However, banks do deduct service charges and withholding tax on various products that reduces the overall profit rates on the savings and the investments of their depositors.
Interestingly, a significant part of the banks’ deposits contains savings in the current account, which means customers including individuals and corporations do not get profit against their money for various reasons.
Banks encourage their new customers to open a current account or savings account with a very minimal profit rate, according to a study conducted by the State Bank of Pakistan (SBP). A majority of banks discourage new and existing customers from investing money in profitable instruments such as Term and Fixed Deposits.
Banks avoid offering profitable options to customers because of their increasing cost of managing interest expenses, the study added.