ISLAMABAD: The government informed the National Assembly on Friday that commercial banks were charging individuals up to 29 per cent interest rate despite the historically lowest 5.75pc policy rate of the State Bank of Pakistan (SBP).

The SBP has maintained the policy rate at 5.75pc since May 2016 — a rate at which it provides liquidity or lends money to the commercial banks that they use as a base rate. The banks are generally expected to charge their customers slightly higher interest rates on the basis of the SBP policy rate after calculating their overhead expenses and risk coverage.

In reply to a question asked by MNA Seema Mohiuddin Jamali, parliamentary secretary for finance Rana Afzaal Hussain provided a written statement to the house on behalf of Finance Minister Ishaq Dar explaining the weighted average rate of interest (WAROI) being charged by various banks to individuals. He explained WAROI as the aggregate rate of interest being charged on all types of loan facilities, including auto, business, agriculture, housing and salary advance loans.

According to the statement, the Silk Bank is charging the highest interest rate of 28.89pc to individuals, followed by 21.91pc by the Standard Chartered Bank. The Habib Metropolitan Bank Limited has the lowest rate of 7.77pc — closest to the SBP policy rate.

While SBP maintains policy rate at 5.75pc, banks extending loans at higher markup

Among the public sector banks, the First Women Bank is the most expensive lender with interest rate of 18.44pc, followed by the Zarai Taraqiati Bank Limited with 13.84pc.

Surprisingly, the United Bank Limited, one of the country’s largest banks, is also charging 20.03pc interest rate to individuals and stands at 4th position, just behind the smaller NIB Bank Limited that charges 20.05pc. Among the top tiers, the Habib Bank Limited charges 14.05pc markup and the MCB Bank 14pc.

Interestingly, the country’s largest bank owned by the government — the National Bank of Pakistan — also charges 13.22pc interest to individuals, compared to 14pc by the small JS Bank in the private sector. The SME Bank, also in the public hands, is extending loans to individuals at 9.62pc, while the Punjab Provincial Cooperative Bank is charging 17.01pc.

Among the public sector banks owned by the provincial governments, The Bank of Punjab is providing loans to individuals at 9.66pc interest rate, followed by the Sindh Bank Limited at 9.73pc and The Bank of Khyber at 10.23pc.

Among the Islamic banks, Bank Islamic has the highest ‘profit rate’ of 13.11pc, followed by the Dubai Islamic Bank 11.65pc, Meezan Bank 11.53pc and Al Baraka Islamic Bank 11.45pc. The MCB Islamic Bank has the lowest rate of 10.38pc.

According to the statement, the Al-Baraka Islamic Bank (formerly Burj Bank) has an interest rate of 12.17pc, the Allied Bank Limited 9.62pc, the Askari Bank 10.95pc, Bank Alfalah 14.06pc, Bank Al Habib 9.72pc, the Faysal Bank Limited 16.3pc, the Samba Bank 15.58pc, the Soneri Bank 11.55pc and the Summit Bank 11.63pc.

CitiBank, Deutsche Bank and Industrial and Commercial Bank of China (ICBC) do not provide loans to individuals.

In reply to another question, the finance ministry informed the National Assembly that the government had received a total of $27.762 billion financial assistance from international bilateral and multilateral lenders, including $26.124bn loans, in three years — from Dec 1, 2013 to Nov 30, 2016.

The loans included $6.4bn the government had obtained from the International Monetary Fund and $2.89bn from eight countries, with the highest inflow of $2.156bn from China. Commercial and multilateral lenders disbursed $16.83bn in three years.

Published in Dawn February 4th, 2017