05-03-2007, 01:33 AM
Right Kamran, there was no disagreement at all, infact I was getting things clear for my self.
If we look from depositors point of view, normally the return is 8 or 9%, and max in my knowledge is 11.5% and that too is on some specific long term products. (as msc mentioned too). How would anyone explain this situation that real interest rate for depositors is negative.
As mentioned earlier, interest rate for lending is almost double than what a deposit holder gets on his deposit. Despite clamming enormous economic growth, specifically in financial services sector, and extraordinary profits earned by commercial banks, this situation is terrible or a monetary policy failure.
A sharp decline in interest rates were witnessed during the period of Dr. Ishrat Hussain. Quite some criticism as well as praise for such big change was there. I personally think that it was not a bad decision than (4 or 5 years back) as inflation's situation was not so alarming, PSBR was not very much and every thing was proper for triggering some boost in commercial sectors. Results were there straight away as huge amounts were disbursed by commercial banks to medium and large businesses.
However, afterwards, as an aftermath of 9/11 huge remittances flooded in Pakistan. As interest rates were quite low, so most of the amount was not deposited with banks, instead was invested in speculation business. The unprecedented boom in urban property prices might had been the consequences. Resultantly some uncontrollable inflation was witnessed, which apparently could be called a monetary policy failure.
Despite claiming consistency in policies the government had to take u turn, as regards, interest rates. A rise in interest rates was witnessed. This happened when Dr. Shamshad Akhter became the president. I can say that former president was more investment friendly while the later's policies are more in favour of general public.
Persistent pressure for business circle to reduce interest rates was/or is there on SBP to cut interest rates, but it didn't yield to that pressure. Reason being quite apparent; inflation.
However, I do not how will anybody justify the present difference in interest rate on lending and borrowing.
If we look from depositors point of view, normally the return is 8 or 9%, and max in my knowledge is 11.5% and that too is on some specific long term products. (as msc mentioned too). How would anyone explain this situation that real interest rate for depositors is negative.
As mentioned earlier, interest rate for lending is almost double than what a deposit holder gets on his deposit. Despite clamming enormous economic growth, specifically in financial services sector, and extraordinary profits earned by commercial banks, this situation is terrible or a monetary policy failure.
A sharp decline in interest rates were witnessed during the period of Dr. Ishrat Hussain. Quite some criticism as well as praise for such big change was there. I personally think that it was not a bad decision than (4 or 5 years back) as inflation's situation was not so alarming, PSBR was not very much and every thing was proper for triggering some boost in commercial sectors. Results were there straight away as huge amounts were disbursed by commercial banks to medium and large businesses.
However, afterwards, as an aftermath of 9/11 huge remittances flooded in Pakistan. As interest rates were quite low, so most of the amount was not deposited with banks, instead was invested in speculation business. The unprecedented boom in urban property prices might had been the consequences. Resultantly some uncontrollable inflation was witnessed, which apparently could be called a monetary policy failure.
Despite claiming consistency in policies the government had to take u turn, as regards, interest rates. A rise in interest rates was witnessed. This happened when Dr. Shamshad Akhter became the president. I can say that former president was more investment friendly while the later's policies are more in favour of general public.
Persistent pressure for business circle to reduce interest rates was/or is there on SBP to cut interest rates, but it didn't yield to that pressure. Reason being quite apparent; inflation.
However, I do not how will anybody justify the present difference in interest rate on lending and borrowing.
