New mechanism to move Govt deposits to SBP under single account in consideration
2 min read
KARACHI: Pakistan Government has drafted a proposal to introduce a Treasure Single Account (TSA) to transfer its deposits that are currently being maintained with commercial banks to State Bank of Pakistan (SBP), the Topline Securities, a brokerage house here on Wednesday.
According to SBP, “the proposal to introduce TSA is being examined by the government of Pakistan in consultation with SBP as part of its agenda to reform public financial management, however, no decision has yet been made to implement the TSA.”
It said, “any decision in this regard will be taken after due consultation with all the stakeholders and assessing its impact on the banking industry. It will, therefore, be premature to form any opinion about the proposed policy decision and thus the market players should avoid engaging in any speculative activities based on this proposal which is still under examination.”
In this regard, the Topline report said, SBP yesterday held a meeting with bank representatives to brief them about the proposed mechanism of TSA.
SBP has asked banks to provide feedback by the end of this month on the viability to consolidate government accounts into a single account as well as the readiness of their system to perform the implementation, the report said.
This is a negative development for banks in terms of systematic risk as total Government deposits with commercial banks are around Rs 1.9 trillion or 13.7 per cent of total deposits, around which, Rs 0.9 trillion are federal, the report estimates.
Bank of Khyber (BoP) has the highest Government deposits (Federal & Provincial) of 63 per cent of its total deposits, followed by Bank of Punjab (BoP) 56 per cent, Askari Bank (AKBL) 33 per cent and National Bank of Pakistan (NBP) 29 per cent.
In the first phase, Federal Government deposits (Rs 0.9tn) will be transferred to SBP under single account, which may be followed by transfer of provincial deposits (Rs1tn).
While we await clarity on the modalities of this mechanism, it may hurt liquidity position of banks and interest income. However, as per banks, it is not practical to bifurcate Federal and Provincial deposits which may prolong the process. The entire amount of Government deposit may not be transferred to SBP.
The report believed that armed forces funds are not part of treasury single account and hence impact on AKBL may not be as much.
About The Author
