The federal government has come up with a plan to consolidate its deposits in one account, named Treasure Single Account (TSA), in order to strengthen its financial command.
Accordingly, the deposits of the government maintained by different banks will go to a single account to be maintained by the State Bank of Pakistan (SBP). In this regard, the central bank held a meeting recently with banks’ representatives to brief them about the proposed mechanism of the TSA.
SBP has asked the banks to provide feedback by the end of this month on the viability of consolidating government accounts into a single account, as well as the readiness of their system to perform this action.
Overall, the government’s deposits with commercial banks are estimated to stand around Rs. 1.9 trillion or 13.7% of total deposits, with Rs. 0.9 trillion belonging to the federal government and the rest belonging to provincial governments.
According to Topline Research, Bank of Khyber (BOK) has the highest government’s deposits (Federal & Provincial) of 63% of its total deposits, followed by Bank of Punjab (BOP) 56%, Askari Bank (AKBL) 33% and National Bank of Pakistan (NBP) 29%.
In the first phase, the federal government’s deposits of Rs. 0.9 trillion will be transferred to SBP under a single account, which may be followed by a transfer of provincial deposits standing at nearly Rs. 1 trillion.
Experts in the banking industry said that the transfer of deposits from banks to the central bank will have negative impacts on banks in terms of systematic risk. It may hurt the liquidity position of the banks and their interest income. It is also not practical to bifurcate the deposits of federal and provincial governments, which is a long process.
State Bank of Pakistan (SBP) stated that,
While the proposal to introduce TSA is being examined by the Government of Pakistan in consultation with SBP as part of its agenda to reform public financial management, however, no decision has yet been made to implement the TSA. Any decision in this regard will be taken after due consultation with all the stakeholders and assessing its impact on the banking industry. It will, therefore, be premature to form any opinion about the proposed policy decision and thus the market players should avoid engaging in any speculative activities based on this proposal which is still under examination.
PSX Reacts Negatively, Sheds 629 Points
Pakistan Stock Exchange (PSX) reacted negatively and shed 629 points during the trading session on Wednesday, which caused a drop in share prices and loss of money. The market has been very sensitive on sentiments and once again gave negative feedback to the government for taking this action.
A bearish trend prevailed throughout the day as KSE-100 index plunged by -1.68 percent to close at 36,752.57 points. Out of 357 companies, share prices of 68 companies recorded an increase while 274 companies registered a decrease, whereas 15 companies remained stable in trading.
Bank of Punjab (BOP) lost 7.4 percent of its share price, as it holds the largest share of that money. Habib Bank Limited’s share price dropped by 5%, National Bank of Pakistan (NBP) 5% and Askari Bank Limited (AKBL) by 5%.
The pressure was also felt by the cement and fertilizer sectors.
HBL, HUBCO, MCB Bank, Bank Al Habib, Pakistan Petroleum Limited, OGDCL, UBL, and FFC were the top stocks that cumulatively contributed -249 points to the negative closing.