Karachi: In a significant policy shift, the State Bank of Pakistan (SBP) has removed the minimum-rate-of-return requirement on eligible savings deposits. This move is seen as a measure to mitigate the financial repercussions stemming from the termination of the government's remittance incentive scheme, which previously subsidized banks' costs associated with acquiring remittances.

According to JS Global, the withdrawal of the remittance rebate scheme has transferred a greater portion of remittance acquisition costs onto banks. Consequently, this regulatory relaxation concerning savings deposit pricing could potentially offset earnings for the banking sector. The analysis suggests that a 100 basis point adjustment in yields paid on customer savings deposits could have a measurable impact on the earnings per share (EPS) of select banks, based on the average savings deposit base over the last four quarters.

The deregulation affects only the portion of individual deposits with monthly average balances exceeding Rs10 million, exempting them from the minimum-rate floor. This implies that the actual repriceable base may be smaller than initially estimated. Furthermore, depositor behavior, influenced by the introduction of InvestPak—a platform providing direct access to government securities—could lead to outflows if rates are reduced too aggressively.

The regulatory change is applicable to both conventional and Islamic banks. The financial impacts of this deregulation are calculated using trailing four-quarter average deposits and a static tax rate, without accounting for potential changes in deposit mix, tax rates, or the effective date of repricing, set for August 1, 2026. A considerable number of small retail deposits may still be subject to the minimum deposit rate, potentially limiting immediate benefits from repricing.