Govt may withdraw deposits if banks levy service charges

The government may withdraw its deposits, in billions, from different commercial banks to avoid the anticipated levy of service charges, it is learnt.

At the moment, the finance ministry is contemplating upon various options, including withdrawal of billions of rupees deposits, from the commercial bank to bar them levying services charges on accounts holders of 1.5 million public sector employees.

All officials in the finance ministry were reluctant to say anything on the record on this subject. When spokesman of the State Bank of Pakistan, Syed Wasimuddin, was contacted on his mobile for comments, he said that the central bank would oppose any move for levying services charges on account holders of the public servants in view of its existing circular.

At the moment the central bank’s circular bars the commercial banks for levying services charges on widows, pensioners and public sector employees. It means that the finance ministry and the central bank are going to join hands for stopping the banks to levy any service charge on public sector employees.

However, some official sources told The News on condition of anonymity, it is under consideration that the finance ministry may threat to the commercial banks for withdrawal of billions of rupees deposits lying in these banks on behalf of government ministries and attached departments.

“If the commercial banks insisted for levying services charges on accounts holders of public servants then the government can withdraw its deposits of over Rs300 billion from the commercial banks,” official sources in the finance ministry replied when they were asked about available options to stop the commercial banks from this move.

According to the sources, the State Bank of Pakistan’s Governor Dr Shamshad Akhtar had already warned the banks for bridging down the lending and deposits rates. The deposits rates given by the banks are very low but so far the commercial banks had not moved to ratify the situation.

If this move approves, it means that the real deposits rates for their clients will go down further and spread of the banks will widen, which is already among the highest in the world at the moment. The banking sector spread stands at 7.5 per cent at the moment.

The sources said although it was the strategic move of the government to keep the National Bank of Pakistan (NBP) in the fold of the public sector and the government could impose restriction on its departments to deposit their money only in the nationalised bank.

Pakistan had pursued aggressive privatisation policy in the aftermath of 90s irrespective of political or military rule in the country. As a result the country’s all major banks are in hands of the private sector except the NBP.

Despite earning huge profits, the sources said, the commercial banks spared no chance for increasing their profits without caring for the middle class people of the country who cannot afford to bear some hidden tactics.

The finance ministry sources said they received many complaints about higher mark up charged by the commercial banks for leasing and loan purposes in the context of increased interest rates in recent months.

The bankers, they said, did not explain to the borrowers at the time of obtaining loans that their rates were subject to the market rates and if there were higher interest rates then they would be bound to pay that.

“When we raised this issue with the State Bank of Pakistan they showed us the signed documents of borrowers,” the official said. The officials said the borrowers claimed that the banks did not explain to them in much detail and these things were kept hidden at the time of signing the loan obtaining documents.

Source: The News