EUR 4.27 For Business Accounts Only

Pakistan Banks: New mechanism to move Govt. deposits to SBP under single account in consideration

 

• Pakistan Govt. has drafted a proposal to introduce a Treasure Single Account (TSA) to transfer its deposits that are currently being maintained with commercial banks, to State Bank of Pakistan (SBP), as per channel checks.
• In this regard, SBP yesterday held a meeting with bank representatives to brief them about the proposed mechanism of TSA.
• SBP has asked banks to provide feedback by the end of this month on the viability to consolidate Govt. accounts into a single account as well as the readiness of their system to perform the implementation, as per channel checks.
• This is a negative development for banks in terms of systematic risk as total Govt. deposits with commercial banks are around Rs1.9tn or 13.7% of total deposits, around which, Rs0.9tn are Federal, we estimate.
• Bank of Khyber (BOP) has the highest Govt. deposits (Federal & Provincial) of 63% of its total deposits, followed by Bank of Punjab (BOP) 56%, Askari Bank (AKBL) 33% and National Bank of Pakistan (NBP) 29%.
• In the first phase, Federal Govt. deposits (~Rs0.9tn) will be transferred to SBP under single account, which may be followed by transfer of provincial deposits (~Rs1tn).
• While we await clarity on the modalities of this mechanism, it may hurt liquidity position of banks and interest income. However, as per our discussion with banks, it is not practical to bifurcate Federal and Provincial deposits which may prolong the process, in our view and the entire amount of Govt. deposit may not be transferred to SBP.
• We believe that armed forces funds are not part of treasury single account and hence impact on AKBL may not be as much.