PESHAWAR, July 24: The NWFP government is giving preference to private commercial banks over its own Bank of Khyber (BoK) for getting comparatively ‘good’ profit against official deposits.
The BoK, set up by the provincial government in 1991, has been compelled to offer mark up rate more than 11 per cent to secure government-deposits.
In open market this ratio is less than 10 per cent ultimately making competition tough for the bank, officials and businessmen told Dawn.
They said the NWFP government at the time of establishment of the BoK had made mandatory for its departments, autonomous and semi autonomous bodies and agencies to keep at least 33 per cent of their deposits with the bank mainly to support it.
Later on, this ratio was decreased up to 27 per cent, they maintained.
Officials said that at the same time the departments were given the choice to opt for any other bank which offered higher interest rates comparing to the BoK for their deposits.
“Most of the government departments due to this option are giving preference to the private banks and ignoring the BoK while depositing their funds just because they offer good mark up rates,” explained the officials.
The deposit position of the BoK on June 30 shows that it had total deposit worth Rs23,959 million, out of which Rs2,150 million belong to the federal government, Rs9,359 million to the provincial government and Rs12,450 to the private sector.
This indicates that the provincial government’s share in deposits stood hardly at 39 per cent.
Officials argued that apart from the NWFP a similar financial institution-Bank of Punjab (BoP)-was established by the Punjab government in 1991, which currently have strong presence in the market comparing to the BoK.
The Punjab government is encouraging its departments to deposit their funds with BoP at maximum six per cent mark up ratio that makes the business easy for the bank to compete other financial entities.
Peshawar Industrial Association President Numan Wazir told Dawn that higher rates offered by the BoK for government’s deposits were ultimately increasing the interest rates for its subsequent lending for business projects.