Pakistan: Needless restriction on bank accounts

A Pakistani-born British citizen recently narrated his ordeal trying to operate his account during his stay in Islamabad, which reflects the absurdity of one of our present banking regulations. He was, like most other overseas Pakistanis, a frequent visitor to the country and upon his arrival used to deposit adequate amount of British pounds in his foreign currency account maintained with a local bank. After meeting the necessary expenses during his stay in Pakistan, he used to leave the remaining balance in his foreign currency account, which soared to thousands of pounds over the years. His foreign currency account not only met his banking requirements adequately, but he was happy that he was contributing to the much-needed foreign exchange requirements of the country. At the end of his last visit to Pakistan, he went to his bank for some withdrawal but was shocked to learn that his account had become dormant and he had to fulfil certain formalities to revive his account. He was informed that every account becomes dormant if no transaction is made during a period of six months. After fulfilling the procedural formalities, his account was revived. He withdrew all the balance in one go and deposited the money in his bank account in England, where no account is made dormant, even if it is not operated for years. The letter writer is sure that, after learning about this condition, most of the expatriates would prefer to close their accounts with Pakistani banks. We cannot but appreciate this Pakistani-born British citizen for pinpointing a problem that is faced by hundreds of depositors in the country almost every day. As such, his case was not solitary or unique. The only difference was that he had the luxury to transfer his money to his account abroad. Leaving aside this particular case, we fail to understand the logic of such a requirement by the SBP. Maybe the State Bank was concerned about the possibility of some misdeeds if the bank accounts were not regularly operated at short intervals, but such wrongdoings could have been easily checked and averted by proper monitoring or supervision of the suspected accounts. Anyhow, the harm done by this requirement far outweighs the perceived benefits. As happened with the British citizen, every depositor will be shocked at first, to know that his account has become dormant in such a short period and then will try to withdraw the amount in cash after fulfilling the necessary formalities. He will not make an effort to comprehend the rationale behind the requirement, but his confidence in the banking system of the country will be certainly undermined due to the threat of dormancy of his account. Some of the depositors may even perceive it as a first sign of default by their banks. Unfortunately, it is believed that most of the institutions in Pakistan are unfriendly towards the common people and such a perception would strengthen further. In an environment like this, it would be more difficult for the banking institutions to mobilise the higher level of deposits which are essential to expand the credit base and revive economic activities in the private sector. Sadly, the present requirement of the SBP works the other way by forcing depositors to avoid banking altogether, or withdraw certain amounts from their accounts frequently to keep their accounts operational. Some of the depositors could circumvent the restriction by giving both the cheque and deposit slip of the same amount at the same time to the cashier of the bank, without making any real transaction. While the client undergoes unnecessary inconvenience, the bank has to suffer in terms of wastage of stationery and manpower. We would not be surprised if some of the clients had already given standing instructions to their banks to operate their accounts once in a six-month's time themselves, merely to keep their accounts operational. All of this discourages the banking habit and could adversely affect the saving rate of the economy which is not in the long-term interests of the country. Keeping all these factors in view, it would be better to give the banks' clients free choice to operate their accounts without any kind of constraint but if this is not possible due to certain reasons, the period after which the accounts could become dormant, if no transaction is made, should be extended from six months to about five years. Depositors need to be facilitated and the State Bank should not subject them to an inconvenience which appears to be largely unnecessary.