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State Bank cuts mark-up rate to 9.5 percent

KARACHI (February 16 2003) : The State Bank of Pakistan on Saturday announced 2.5 percent reduction in the mark-up rate for commodity operations financing of the government.

It was a big cut since April 2000 when the mark-up rate for commodity operations was fixed as 12 percent.

“It has been decided to reduce the said rate of mark-up from 12 percent to 9.5 percent per annum,” said a circular issued by the State Bank.

The new mark-up rate will be applicable from February 1, 2003, for commodity operations financing of the government and its agencies.

Banking sources said that the mark-up rate has been reduced in the wake of general reduction in the interest rates of all banking products and other related areas.

“As regards rate of mark-up on wheat procurement by the private sector, it is advised that banks may provide financing facility to the private sector on a market-based rate of mark-up linked with T-bill rate,” said the circular.

Bankers believe that the private sector may find it easy to get cheaper money from the banking sector compared to the mark-up rate of 9.5 percent fixed by the SBP.

Because of surplus liquidity in the market and rate cuts by the SBP on different bonds, private banks would find it comfortable to lend their money at 7 to 8 percent per annum to the private sector, bankers observed.

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