SBP removes minimum deposit rule for conventional banks
The State Bank has removed the Minimum Deposit Rate (MDR) requirement for all conventional banks on deposits from financial institutions, public sector enterprises and public limited companies. The State Bank issued two circulars on Tuesday for conventional banks and Islamic banking institutions (IBIs). The circulars carried several instructions specific to the IBIs. The MDR is a regulatory mechanism introduced by the SBP to ensure depositors of conventional banks get 150 basis points less return than the prevailing policy rate. Every conventional bank is bound to pay 13.5pc to depositors as long as the key interest rate remains 15pc. Islamic banks are exempted from this condition. According to the central bank, the MDR will now be applicable only to deposits of individual account holders.