SBP calls for complete
phase-out of all such schemes and gives Dec 31, 1999 as deadline to banks
By AMANULLAH BASHAR
July 19 -25, 1999
The commercial banks in Pakistan have done a magic by attracting over
Rs47 billion through their lottery schemes during a short span of about one year which is
unprecedented in the banking history of this country.
Referring "Mala-Maal" scheme, MCB sources told PAGE with a
sense of pride that it attracted as much as Rs12 billion, only in 3 months. This
tremendous success was self explanatory of bank's performance and the confidence of the
investors they have in our banking system. The Habib Bank Ltd (HBL), which was senior in
initiating the concept of lottery scheme to raise its base deposits, grabbed a share of
over Rs20 billion while the United Bank Ltd (UBL), which was also in the run, performed
Apparently, the banks have not reacted negatively over the decision of
the State Bank of Pakistan (SBP) which has directed them to phase out prize schemes by
Dec.31,1999, however, they have a lot to say in support of these schemes which helped to
strengthen their deposits so swiftly and at a much lesser rate of return too. However,
there was no sign of panic among them regarding possible onslaught for withdrawals
following termination of these schemes. Withdrawal from lottery schemes, if so happened,
would not pose any threat to bank deposits as liquidity of over Rs150 billion would be
pumped into banking system through the maturity of treasury bills by the end of December
1999 which is enough for bankers to help maintaining their cool.
Banking circles are anticipating that there would be no massive
withdrawls as a large majority of the participants in these schemes are small investors
having no option but to save their money in the banks.
Players in different segments of the economy, including smaller private
banks, brokerage houses in stocks and securities, National Saving Schemes, real estate
etc. however, have taken a sigh of relief over SBP's decision. They were of the opinion
that their business had come to a virtual halt as the charm of making easy money through
these lottery schemes had pulled out the investors from other sectors.
Humayun Akhtar Zubairi, a lucky winner of 50 tola gold prize of MCB
scheme, while commenting on withdrawal of lottery schemes, said that though he was a
beneficiary, he still welcomes the decision of the State Bank in the larger national
interest. Zubairi, an employee of Cherat Cement Ltd, said that according to various
reports appearing in the Press, the lottery schemes were affecting natural growth of the
national economy. Hence SBPs decision was in right direction, he felt.
Apart from the lucky winners who made their fortune out of the lottery
schemes, publicity campaigners, electronic and print media also had a large share in
lottery business, said a senior official of an advertising company. Lottery schemes had
provided a windfall opportunity to these sectors especially at a time of shrinking
business due to an overall depressed economic spell prevailing in the country.
As per decision of the State Bank, the commercial banks would not be
able to carry out the publicity campaigns after July 20,1999, as the State Bank of
Pakistan (SBP) has asked the sponsors of the lottery schemes to stop advertising from next
According to SBP decision, the existing deposit schemes based on
incentives whether in cash or in kind, shall be phased out completely latest by December
Banks having such schemes would give to the SBP a time bond action plan
for their termination within the given time frame.
All public advertisements soliciting deposits from the general public
should indicate rate of return on their deposits.
The central bank has already issued instructions to the commercial
banks not to launch any new deposit mobilization scheme based on incentives either in cash
The banking system will, however, be free to develop and expand their
deposit mobilization efforts based on explicitly stated rates of return and provision of
additional and more efficient financial services to the depositors.
The decision to terminate the prize schemes was taken in a meeting
presided over by Dr.M. Yaqub, Governor SBP on July 10, 1999.
The bankers estimate that over Rs47 billion have been attracted through
The HBL which initiated in the prize scheme by launching the most
alluring "Crore Pati" scheme, successfully managed to score a quantum jump of
collecting Rs20 billion in its deposit base. The UBL and MCB also joined in the lottery
business later on.
The historic collection of over Rs47 billion by the banks in a short
span of time speaks itself about the great temptations people have in the lottery schemes.
The SBP banned these schemes because of their socio-economic implications. Lotteries were
also being described as against the norms of Islamic values. "Why the Prize Bonds
Scheme is being tolerated by the SBP?" is however perturbing the minds.