Please refer to para v of BPRD Circular No.29 dated 13^th July, 1999 wherein the banks/NBFIs were allowed to develop and expand their deposit mobilization efforts based on explicitly stated expected rates of return and provision of additional and more efficient financial services to the depositors.

2.         It has come to the notice of the State Bank that some banks are initially offering a higher rate of return on long terms deposits i.e on Term Deposit of different maturities etc. However, with the increase in the cost of the funds, resulting in the decrease in profitability in due course of time, rates of profit on these deposits are also lowered. This has generated a series of complaints from the depositors wherein SBP is dragged into unnecessary correspondence.

3.         In order to avoid any misconception and possible dispute with the investors/depositors, the banks are advised to clearly indicate, while mobilizing deposits, that the same are on profit & loss sharing basis and that the rates on such deposits are not final and subject to changes under the said system. In case, the depositor does not agree with the revised rate, due to any downward change in the rate of return declared periodically by the bank, he may be allowed to withdraw the deposit after adjustment of extra mark up paid as per schedule of the bank, without further deduction of any penalty.

4.         Please acknowledge receipt.