Senate Body Questions High Interest Rates Charged by Islamic Banks

The Senate Standing Committee on Finance Wednesday directed the State Bank of Pakistan (SBP) to provide a detailed briefing on Islamic Banking after the committee chairman said that Islamic banks are taking advantage of consumers by charging high interest rates. The committee, led by Chairman Senator Saleem Mandiwalla, also directed the central bank to provide a briefing on Islamic banking practices in other countries. Senator Mandiwalla was critical of Islamic banks and said that Islamic banks are charging up to 30 percent interest rates while conventional banks charge around 20 percent. He went to the extent of saying that Islamic Banks are defrauding their customers. The committee chairman said that he has received many cases where Islamic Banks were charging exuberant interest rates. SBP Deputy Governor told the committee that currently the share of Islamic Banks is 25 percent while conversational banks have a 75 percent market share. The senators also complained that delivery of credit cards is taking months and in some cases, credit cards haven’t been delivered even after passage of 5 to 6 months. The committee was also told that funds of Rs. 97 billion are lying in around 14 million dormant bank accounts. The SBP presented a suggestion to increase the period of permanently closing dormant accounts from 10 to 15 years, which was approved by the committee.