ISLAMABAD, Feb 5: Top executives of 42 banks have been asked to appear before the Competition Commission in Karachi on Feb 12 to disprove the suspicion that they had been fleecing depositors as a “cartel”.

Informed sources said that all these banks have been asked as to why they were charging increased interest rate and paying less profit to customers.

The public hearing will continue for two days, from Feb 12 to 14, to be presided over by a senior member of the CCP, Abdul Ghaffar.

Banks are raising deposits and offering loans, but there is a difference of spread between the two and it is causing problems and losses to both loan-seekers and depositors.

Sources claimed that the central bank, which was supposed to look into, was not taking up the issue.

Banks have a powerful lobby and some people sitting in the finance ministry were allegedly supporting them with the result that institutions, like Central Directorate of National Savings, were also suffering as they had not been allowed to offer increased profit to their clients.

An official in the ministry of finance said that Pakistani banks have earned an unprecedented profit during the last few years compared to other countries.

He quoted IMF’s report last year in which it stated that as far as profit of the banking sector was concerned, Columbia and Pakistan remained first and second, respectively, in the world. Colombia is known for its drug business and illegal money. When contacted, CCP chairman Khalid Mirza told Dawn that banks were reportedly charging a spread of around eight per cent which seemed to be high considering that there should be a lot of competition amongst 42 banking institutions in the country.

“This may be high even keeping in view the high cost of intermediation in Pakistan. Obviously one wonders what is happening,” he said.

Responding to a question, Mr Mirza said that the banking association had given an advertisement in newspapers recently about their new enhanced saving accounts scheme.

The association had stated that it would give a fixed interest rate of four per cent on every Rs20,000 deposits. But in case the depositor has just left with Rs5000 in the account, he or she will be charged Rs50 every month by banks.

“Banks appear to have fixed the interest rate. They have pre-determined the rate of profit, and thus many people found a collusion and possibility of cartel and this will be thoroughly investigated by the CCP in its hearing in Karachi,” Mr Mirza said.

“We will be looking into the matter and give banks a fair and full opportunity of being heard before taking a view in the matter,” said the chairman of the Competition Commission.

The banks could have a valid point of view which would obviously be given due consideration, he assured.

The objective, Mr Mirza pointed out, was to determine as to whether there was any malpractice and on the basis of the conclusion of the hearing, any action could be taken.

“We will drop the charges if we find some proper and fair explanation,” the chairman of the Competition Commission said.