In a notification issued by the SBP, all commercial banks have been directed to divert the accounts of all government departments before the start of the new fiscal year with the central bank.
According to the directives, no new account of any government department in a private bank will be opened and all previous accounts will be closed off with immediate effect.
An employee of National Bank, on conditions of anonymity informed that talks were underway to prevent the transfer of funds from the Civil Armed Forces to the central bank. He said that the National Bank wanted to retain these funds and wanted an exemption from the SBP but the mother bank has not yet given its verdict on the issue.
Under this circular, secret funds will also be transferred to the center, whose transactions will be through the finance division. However, the informant thinks this is unlikely as the processing of these funds is highly confidential.
What is the new monetary policy?
The SBP has taken this step in the light of a decision made by the Ministry of Finance.
According to the notification, under the new policy, after federal agencies, all provincial departments will also be required to transfer their accounts to SBP.
The new policy came into effect after it was revealed that the government was placing gigantic sums of money into commercial bank accounts, thus causing the issuance of the Single Treasury Bill 2020 that is to be implemented now.
Reportedly, government departments will approach the Secretary of the Ministry of Finance, Direct Debt, to obtain their money.
What is the purpose of a single treasury account?
It is to use money easily and in a timely manner. The directive is based on economic reasons, not for profit gains. In addition, it will become easier to track government money and make transparent any excesses and shortfalls. Money laundering and corruption will be prevented through this updated policy.
How will commercial banks be affected?
Sohail Khan, a banker of Meezan Khan while speaking to The Independent Urdu, said it would not make any significant difference as the share of funds with each bank is already marginal.
However, a consequence could be the downsizing of banks due to losses resulting from this policy, which would inevitably result in the unemployment of thousands of bank employees in the country.
Will it help the economy?
Ashraf Malkham, a senior journalist for economic affairs, said the small commercial banks which retain money of government departments can possibly commit fraud or go bankrupt; in such a situation the money is likely to sink. The policy would prevent this.
He further said that private banks do not conduct audits which prevents the audit of government funds deposited with them as well but the single treasury deposit would allow for a transparent audit.
On the other hand, another employee from a private bank said that this action would be injurious for the economy as it would reduce rupee circulation and deprive the government itself of the taxes that these banks deposit in the public treasury.