SBP to Enforce Strict Monitoring of Interest Rates Offered by Banks

State Bank of Pakistan (SBP) has revised the systematic reporting pattern for commercial banks to monitor interest rates and deposits rates being offered to borrowers and depositors in various schemes and products.

In this regard, the central bank issued guidelines for commercial banks along with a revised reporting system that will improve the accuracy of the data and the efficiency of the banking industry.

All the interest rates for SBP concessional schemes like Export Finance Scheme and Long-Term Financing Facility and others like PM’s loan scheme for youth shall be aligned with the prescribed rates.

The central bank instructed banks to verify if any local currency loan is priced below SBP Reverse Repo Rate. It further asked banks to verify foreign currency deposits on significantly high-interest rates of more than 4%.

Ideally, overnight interbank placement and lending rates, among conventional banks, shall fall within the SBP Interest Rate Corridor (i.e. Policy Rate – 150 bps to Policy Rate + 50 bps).

Compensated loans and remunerative deposits at abnormally high/low rates (e.g. exceeding 40% or below 2%) shall be double-verified from relevant departments/branches before submission, SBP said.

Gross disbursements are the total amounts disbursed in any currency as loans during the month. It also includes loans renewed or rolled over during the month. In the case of running finance, the disbursed amount will be the total amount availed by the borrower during the month.

The overall spread (the difference between the weighted average rate of lending and the weighted average rate of deposit) of any bank shall not be negative.

Foreign currency deposits and loans shall be reported in equivalent Pakistan Rupee (PKR) (in thousands). The necessary conversion of foreign currency amount into PKR shall be made by using the respective currency’s interbank exchange rate for the last day of the reporting month.

In the case of conventional bank deposits, banks must check if there is any local currency saving deposit reported on an interest rate less than the Minimum Deposit Rate (MDR).

Fresh deposits mean deposits collected during the month. It also includes deposits of re-priced/rolled-over deposits during the month.

Lending and deposit amounts shall be reported, in subject Rate of Return (RoR) statement, in thousands of rupees. It shall be a non-negative number.