KARACHI, Feb 24: More than a million bank accounts were closed down in the last fiscal year ending in June 2005. But let’s have a look first at how much profit people were getting on their bank accounts.

If you had put a hundred thousand rupees in your bank account on January 1, 2005 for a fixed period of six months, guess what return you would have earned? Well, only Rs910. The reason is the average return paid on fixed deposits of six months to less than one year was 1.82 per cent at the end of June last year. And a 1.82 per cent return on Rs100,000 means Rs1,820 for full year and half of that comes to Rs910. Simple calculation. Isn’t it.

But saying that the average return on bank deposits was this or that makes little sense to people. So let’s be a bit more specific. If you had put one hundred thousand rupees in a fixed deposit of six-month to one year with any of the four public sector banks, you would have earned an annual return of two per cent i.e. slightly above the overall average return of 1.82 per cent. The public sector banks include the banking heavyweight National Bank, First Women Bank, The Bank of Punjab and The Bank of Khyber.

However, if your six-month deposit was placed with any of the 20 local private banks, then you would have got a profit of 1.95 per cent. Or in case you had maintained a six-month deposit with any of the 11 foreign banks, you would have received 1.4 per cent return.

The State Bank monitors average rates of return offered by individual banks but in its publications it only mentions the average rates of return of various groups of banks. But at least, group-wise data also helps one in making a more informed decision on maintaining deposits with banks.

The data compiled by the SBP show that whereas average rate of return of all banks on six-month to one-year deposits was 1.82 per cent in June 2005, the average return on saving accounts was even lower — 0.82 per cent. And here again, public sector banks handed out the most generous return of 1.12 per cent. Local private banks offered 0.88 per cent return — and foreign banks 0.26 per cent. Now what all this means?

This means that if you had a hundred thousand rupees with any of the four public sector banks you would have got Rs1,120 in June last year. But if you were operating a saving account with any of the 20 local private banks, you would have got much lesser — Rs880. And, in case you were a saving account holder of any of the 11 foreign banks, you would have received only Rs260. Facts really speak for themselves!

And facts tell us that at the end of June 2005, total number of bank account stood around 26.985 million — down from 28.478 million at the end of June 2004. That means about 1.493 million accounts were closed down during the last fiscal year. Had this anything to do with the humiliatingly low rates of return offered to the depositors? Perhaps, yes.

But facts also tell us that at end-June 2005, all 39 banks, including 11 of foreign origin operating in Pakistan, had total deposits of Rs2,428 billion, up from Rs2,002 billion at end-June 2004. That is, banks managed to attract Rs426 billion worth of new deposits between July-June 2004-05 even though they were offering very low rates of return to their depositors.