KARACHI, Sept 1: Banks may now find raising deposits difficult on false promises as the central bank has warned them to stop this practice immediately. Director of the Banking Policy Department of the State Bank Mr Kamran Shehzad has written a letter to all banks and development finance institutions or DFIs in this regard. The letter issued here on Thursday stops banks and DFIs from using ambiguous terms like Conditions Apply, etc., in their advertisements seeking to generate deposits.
Of late, banks and DFIs have been placing large advertisements in newspapers offering apparently high rates of return on their deposit schemes but in fact hiding many ifs and buts.
They have been inserting a popular phrase Conditions Apply in all such advertisements that promise high rates of return on deposit schemes but the ads carry these words at an unnoticeable place and in the smallest possible font size. The result has been that many individuals as well as corporates and businesses ignore these words and tend to believe what is splashed across the ad area in bold and large font sizes -— the expected rates of return.
Even if some potential investors spot the words Condition Apply it is impossible for them to know what conditions the advertisers are talking about. Worse still, when they actually fill in the prescribed application forms to deposit money in the so-advertised schemes, they find these so-called conditions printed overleaf in the fine prints almost unreadable. The result is that when their deposits mature they do not receive the promised rates of return for one reason or the other.
“It has been noted with concern that some banks/DFIs are publicizing their deposit mobilization schemes without disclosing the correct and complete terms and conditions with regard to the rate of return,” the SBP says.
“The tendency is to use ambiguous terms like Conditions Apply, etc., in advertisements. As a result of this practice the State Bank is receiving a number of complaints against banks/DFIs from aggrieved depositors.”
The central bank says it has viewed seriously “the failure of the banks/DFIs to observe the (SBP) instructions in letter and spirit” issued earlier with the objective to avoid this and similar situations.
The SBP has directed all the banks and DFIs “to ensure that all advertisements in media (print, electronic or in any other form) soliciting deposits from the general public should explicitly indicate the annualized rates of expected return. The words Conditions Apply or other similar wordings should not be used. The scheme on which profit is paid on monthly/quarterly/half yearly or at any other regular interval, the expected rate of profit to be paid on such intervals should be clearly indicated in the account opening forms or advertising material in Bold Letters.”
The SBP has also directed all banks to convey to their existing account holders the correct position on the above lines if they have not done so earlier. The central bank has asked the banks and DFIs to submit a compliance report by the end of this month and warned them that any violation of the above instructions would attract penal action against them.