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Ban on prize schemes

  1. Decline in world cotton prices
  2. WAPDA Bonds
  3. SECP launched to cleanse corporate sector
  4. Why tax on reserves of corporates?
  5. Ban on prize schemes
  6. Changes in SLR and CRR requirements

SBP calls for complete phase-out of all such schemes and gives Dec 31, 1999 as deadline to banks

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 equally well.

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 week.

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 31, 1999.

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 or kind.

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 these schemes.

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.