To avoid high interest payouts to depositors, banks are forcing customers to shift to Islamic banking

Banks in the country are converting conventional savings accounts to Islamic accounts to avoid paying high interest to depositors.

To avoid high interest payouts to depositors, banks are forcing customers to shift to Islamic banking

Pakistani banks are forcing customers to shift to Islamic banking in an attempt to avoid high-interest payouts.

Banks in the country are converting conventional savings accounts to Islamic accounts to avoid paying high interest to depositors. Branch managers that used to convince customers to sign up for things like advance payments on mutual fund investments are now converting savings into Islamic accounts. Some banks have even issued warnings to the holder, that their account will be closed if they do not take a suitable decision in 30 days.

Banks force customers to shift to Islamic banking

While talking to news sources, a market expert remarked that conventional savings deposits have to receive a minimum deposit rate or MDR, which is currently 15.5%. This is linked to the SBP Floor Rate of 16%, i.e. off by 0.5%.

The market expert further remarked that Islamic savings permits getting ripped off, and there isn’t any minimum payout, hence, most banks are pushing for it. On the other hand, business seekers are looking for a safety net and more residual dollars, after paying for inputs on settlements to banks. Likewise, they want proper treatment in return for their cash flow. However, banks are looking for a shortcut by forcing account holders to convert and de-risk payments on credit for buyers at overseas and home. They are also putting in an effort to avoid paying interest at high rates to depositors. Habib Bank Limited (HBL) was the first bank to do it, and Standard Chartered (SC) is the newest entrant.

Standard Chartered has issued warnings to savings account holders to convert to Islamic Banking Savings Accounts. Its Saadiq Savings account is based on the Mudaraba principle, where funds will be invested in Shariah-compliant assets. This offer by the bank is valid for 30 days (from the date of these instructions), it also remarked that it ‘may not be able to continue the client’s relationship including but not limited to (the) closure of their account with the bank.’

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