October 20, 2002	Sunday	Sha'aban 13, 1423

KARACHI, Oct 19: The State Bank has taken notice of increasing complaints by the depositors that the banks lower the rates of return on fixed term deposits periodically.

In a circular issued to all the banks the SBP has advised them to clearly indicate while mobilizing deposits that the rates of return are subject to change. It has also advised them not to charge any penalty if the depositors withdraw their deposits after a downward revision in the rates of deposits.

Says the SBP letter: “It has come to the notice of the State Bank that some banks are initially offering a higher rate of return on long term deposits i.e. on term deposits of different maturities. However, with the increase in the cost of funds, resulting in the decrease in profitability in due course of time, rates of profit on these deposits are also lowered.”

“This has generated a series of complaints from the depositors wherein SBP is dragged into unnecessary correspondence.”

“In order to avoid any misconception and possible dispute with the investors/depositors, the banks are advised to clearly indicate while mobilizing deposits, that the same are on profit & loss sharing basis and that the rates on such deposits are not final and subject to changes under the said system.”

“In case, the depositor does not agree with the revised rate, due to any downward change in the rate of return declared periodically by the bank, he may be allowed to withdraw the deposit after adjustment of extra markup paid as per schedule of the bank, without further deduction of any penalty.”