The business community asked the central bank to take action against Islamic banks for not implementing its regulations of minimum profit of 7.25 percent to their depositors on saving accounts.
The central bank had made this announcement after it had raised the policy rate to 8.75 percent from 7.25 percent. The central bank through a social media platform also asked customers to file a complaint with their bank if it gives less profit on the savings account. In case of non-compliance by the bank, the SBP asked the depositors to contact its customer complaint help desk.
For opening a savings account, the SBP informed the customers to visit the bank of their choice. From January 2022, it has been made mandatory for banks to provide the option to open bank accounts digitally with remote biometric verification and without the need for a customer to visit a bank branch.
The Friends of Economic and Business Reforms president and LCCI former vice president Kashif Anwar said that the State Bank of Pakistan had announced that the profit rate on savings accounts will rise by 1.5 percentage points to a minimum of 7.25 percent by Dec 1 for all banks including conventional as well as the Islamic banks. But, unfortunately, some Islamic banks are not implementing these directives of the central bank on the plea that the SBP has passed orders only to conventional banks.
If the Islamic banks do not offer minimum profit of 7.25 percent to saving accounts holders set by the SBP, the deposits will be shifted to the conventional banks, hurting the growth of Islamic banking industry, which is not good, he added.
Quoting the figures, he said that Islamic banking industry’s assets and deposits have more than doubled during the last five years and it now has 17 percent share in assets and 18.3 percent in deposits of the overall banking industry. This means Islamic banks have now taken 5 percent share of conventional banks as their share in deposits increased from 13.3 percent in 2015 to 18.3 percent in 2020.
This growth in assets and deposits of the Islamic banking industry is encouraging, particularly due the fact that the industry was also faced with the COVID-19 pandemic challenges during 2020, he said.
The Islamic banks also has taken 60 percent share in the housing finance, he said and added that it has also taken 40 percent share in mutual funds and 63 percent share in pension fund in the industry. Several surveys, including that of a State Bank, have revealed that many people are reluctant to get financially included because conventional banking system is interest-based, he said.
This is the reason that the central bank is pushing Islamic banks to enhance their share in the industry, he said. The SBP has set a target of increasing Islamic banks’ share in the industry to 25 percent by 2025. It is to be noted that the SBP has won the IFN global award for 2nd consecutive year as best Central Bank in Promoting Islamic Finance for the Year 2021 Islamic Finance News (IFN).
An arm of RED money Group, Malaysia, has announced State Bank of Pakistan as the best Central Bank of 2021 across the world in promoting Islamic finance. It is appreciable for the SBP to promote the Islamic banking in Pakistan but it would have to take strict measures to keep a check on the huge profitability of this industry to save the interests of customers.—Agencies