KARACHI: The removal of the Minimum Deposit Rate (MDR) regime is expected to allow commercial banks to absorb the costs resulting from the subsidy removal on remittances while helping encourage more investment in the government securities through the InvestPak platform, analysts said on Tuesday.
On Monday, the State Bank of Pakistan (SBP) restricted the minimum profit rate requirement for bank deposits to individual account holders who maintain a monthly average balance of up to Rs10 million, effective August 1. The bank also launched the InvestPak digital platform, which enables both retail and institutional investors to invest directly in government securities.
“We expect the aforesaid development to be positive for the banking sector, as it would modestly reduce banks’ cost of deposits,” said Awais Ashraf, director of research at AKD Securities Limited.
“Particularly, banks with a higher concentration of savings accounts and deposit mix skewed toward individual, private sector, and insensitive towards saving rate are expected to be the main beneficiaries,” Ashraf added.
“We expect the net impact on cost of deposit to remain modest, as banks would also seek to avoid deposit outflows,” he said. He noted that the removal of MDR will provide room for commercial banks to absorb cost of removal of subsidy on remittances while ensuring transaction-free inflow without having negative impact on profitability.
Topline Securities said in a note that the objective of removing the MDR condition is to compensate banks on the remittances cost side, as the government has discontinued the Telegraphic Transfer Charges Incentive Scheme (TTCIS), which was a sort of subsidy provided to financial institutions to attract remittances through formal channels.
The latest SBP circular completes the phased rollback of the MDR regime that began with the exemption of corporate and institutional deposits in November 2024. “The newly negotiable pool is sizeable on paper: SBP deposit-size data (March-2026) shows that roughly Rs5.3 trillion, or nearly a third of the individual deposit base, sits in accounts above Rs10 million, held by barely 0.2 per cent of account holders. Importantly, the circular removes the obligation rather than the rate itself,” said Saad Hanif, head of research at Ismail Iqbal Securities.
“Banks remain free to continue offering existing returns, and we expect competitive dynamics rather than regulation to determine where pricing eventually settles,” Hanif said.“We expect the earnings impact to be positive yet measured and would caution against aggressive repricing narratives for this segment. Depositors above the Rs10 million threshold are typically banks’ most demanding and best-advised clients, with many already enjoying premature encashment options that provide protection against rising rates alongside free liquidity,” he added.
He believes with InvestPak now offering a frictionless route into government securities, any bank attempting a meaningful rate cut risks either having to restore pricing to retain balances or losing the business to the sovereign altogether. That said, a fair share of these balances belongs to passive holders who prioritise convenience over yield, allowing banks a quiet, selective trim at the margin.
InvestPak should deepen the retail investor base for government securities over time, gradually disciplining deposit pricing while diversifying the sovereign’s funding profile, making this a slow-burn cost tailwind for banks rather than a one-off earnings event, Hanif said.
