Protection for small savers, flexibility for large deposits

The State Bank of Pakistan (SBP) has revised the scope of the minimum-return requirement on savings deposits. Previously, the requirement applied to individual savings deposits regardless of the size of the account balance. Effective August 1, 2026, it will apply only to individual depositors maintaining a monthly average balance of up to Rs10 million.

The new policy requires that banks pay a minimum profit rate as prescribed by the SBP to eligible individual depositors who have monthly average balances not exceeding Rs10 million. However, individuals maintaining a monthly average balance above Rs10 million will no longer be covered by the minimum-return requirement. The flexibility also extends to non-individual depositors, such as companies, corporations and institutions, allowing banks to determine profit rates based on commercial negotiations.

The change comes alongside the launch of SBP’s new digital platform InvestPak, which allows retail and institutional investors to invest directly in government securities. According to the SBP, the platform provides a secure and convenient channel for investors seeking market-based returns. By making government securities more accessible, the initiative may also support financial literacy and encourage diversification beyond traditional savings accounts.

From a policy perspective, the effectiveness of the reform will depend on implementation and market competition. SBP should monitor whether banks pass lower funding costs on to borrowers, whether large deposits move excessively from banks into government securities, and whether the change affects private-sector credit. Banks should also be required to disclose deposit rates, charges and terms clearly so that customers can compare alternatives. At the same time, InvestPak should be supported by investor education on maturity, liquidity, taxation and price risks. Regular publication of data on deposit repricing, investor participation and changes in bank lending would help assess whether the reform is promoting financial deepening rather than merely shifting savings from bank deposits to government debt.

However, for most Pakistanis, the policy is unlikely to result in any immediate change. The great majority of individual savings accounts have balances significantly less than Rs10 million and thus are still fully covered by the minimum-profit provision. The new framework mainly affects the high-net-worth individual and institutional depositor in its main respects. Eliminating the minimum profit requirement for larger balances affords banks the flexibility to tailor the deposit pricing to market conditions, liquidity requirements and customer relationships. This can help banks manage their funding more efficiently and create more customised products for corporate and high-net-worth clients.

This policy could make the pricing of large deposits more responsive to market and liquidity conditions. Monetary policy is more effective in reducing inflation and increasing borrowing and economic activity when banks can immediately pass on the impact of changes in the policy rate to the interest they charge on loans and pay on deposits.

It could also encourage participation in government securities and other market-based investment products. As there is no minimum return guarantee on large deposits, sophisticated investors may be tempted to invest in Treasury Bills, Pakistan Investment Bonds (PIB), Sukuk, mutual funds and other regulated investment products. This trend is being helped by the introduction of InvestPak, which provides investors with direct digital access to the Government of Pakistan’s securities.

The changes also bring an important financial literacy message. The traditional perception is that keeping the money in a savings account is the best way of ensuring its safety. The new system involves informing the saver about the different applications of financial instruments. It is appropriate to keep money in a savings account for the purpose of short-term and emergency use, while others require investment spread.

However, the minimum return does not always coincide with higher returns on investment for common people. In the case when the rate of inflation is higher than the profit from savings accounts, the value of such savings will keep on decreasing. It is another important aspect of financial literacy that helps distinguish between nominal and real rates of return in light of inflation. Savings can be profitable in rupees but unprofitable in terms of real purchasing power.

Moreover, this policy highlights the need for matching investments with financial goals. It would be wise to have emergency funds and short-term liquidity, as this is suitable for savings accounts in view of the fact that it guarantees safety and easy accessibility of funds. On the other hand, it is better to have a diversified portfolio that includes investments in government securities, mutual funds, or Sukuk depending on the nature of investment and investment horizon.

Overall, SBP’s new policy is a modernization of the nation’s savings system, not a step back from protecting depositors’ interests. This measure provides some protection to the majority of individual depositors while also allowing the market to play a major role in valuing large deposits. In conjunction with the introduction of InvestPak, this measure helps develop the overall financial system and encourages investment. Additionally, it promotes financial education, as individuals will realize that managing their money well involves not only earning profits but also making sound judgments about risk, diversification, inflation, and financial planning.

Copyright Business Recorder, 2026