Islamic banks brace for minimum deposit rate

Share prices of Islamic banks took a beating on Monday, thanks to Finance Minister Dr Shamshad Akhtar’s recent statement that customers are getting short-changed by Sharia-compliant lenders by way of insufficient returns on deposits. Speaking to a TV host, Dr Akhtar said the State Bank of Pakistan (SBP) should review the issue of minimum deposit rate (MDR) — a provision that Islamic banks are currently exempted from. With every new finance minister in Islamabad comes a fresh wave of measures aimed at shifting money from the bottom lines of banks to the national exchequer. But for the first time in many years, there’s a proposal on the cards that, if adopted, will transfer money from (Islamic) banks to customers. Back in 2008 when the current finance minister held the position of SBP governor, the regulator directed banks, including Islamic ones, to pay minimum profit rates on savings accounts. Even though Islamic banks were exempted from the provision in subsequent years, conventional banks are still required to pay a certain rate on all savings accounts.