KARACHI, July 10: The State Bank has allowed all the banks and non-bank financial institutions (NBFIs) to offer as much rate of return on foreign currency deposits as they deem fit. Earlier the banks were supposed to ensure that the return on foreign currency deposits do not exceed LIBOR (London Inter-bank offered rate).

The central bank has notified its decision to all the banks and NBFIs through a circular BPD no 17.

Bankers say most foreign banks having a large base of foreign currency accounts are currently offering below 2 percent return on one-year deposits. But some local banks are offering a little more to increase their deposit base. They say the decision of doing away with the cap on the profit on FCY deposits the banks will be able to mobilize more foreign currency deposits. At the moment the banks have some $2 billion worth of foreign currency deposits. The State Bank has allowed mobilization of these deposits in June 1998 after freezing the then existing $11 billion foreign currency deposits.