Earlier this month, most commercial banks announced a fee on deposits greater than Rs 5 billion. However, with the change in MDR regulations on Tuesday by the State Bank of Pakistan (SBP), banks have chosen to withdraw the fee.
Major banks like Bank Alfalah and Meezan Bank have reached out to their customers intimating this change. According to Topline Securities, “Banks are now withdrawing huge monthly fees on month end balance with immediate effect after SBP provided relief on min deposit rate. These notices of withdrawal are also posted on their social media handles.”
It is important to note that the charges extended by the banks were yet to come into affect. Most of the banks had introduced a fee greater than 5% on deposits higher than Rs 5 billion.
As of June 2024, only 326 domestic accounts held deposits exceeding Rs 5 billion. Among these, only one account belonged to an individual, with a balance of Rs 8.17 billion.
“If the number of such individual accounts has increased since then, that would be a different matter. However, it’s unlikely, as people generally do not hold such large sums in bank accounts,” explained Mir Nejib Rahman, a financial services consultant. “Typically, this kind of money is invested in mutual funds, properties, or other avenues of investment,” he added.
“At a personal level, this won’t make much of a difference,” remarked Rahman. “The individual account holder can easily split their funds between multiple banks to avoid the fee. For instance, if someone has Rs 8 billion in one account, they could simply divide it into Rs 4 billion across two banks, bypassing the charges altogether. However, private sector business and government might face financial costs if they have deposits in the banks that have levied monthly fees “.
Following the new changes in the SBPs regulations, the Banks can negotiate the return they would give to institutional depositors. This means that while no direct fee will be charged, the banks will meet their objective of a higher Advance-to-Deposit Ratio (ADR), one way or the other.
