The State Bank of Pakistan (SBP) has announced significant revisions to the Minimum Profit Rate (MPR) requirements and guidelines for Islamic banking. Effective January 1, 2025, the MPR will no longer apply to financial institutions, public sector enterprises, and public limited companies.

Additionally, Islamic Banking Institutions (IBIs) are now required to pay at least 75% of the weighted average gross yield from their investment pools as profit on PKR savings deposits.

Previously, banks were mandated to pay an MPR on all Pak Rupee savings deposits, set at 50 basis points below the prevailing SBP Repo Rate. This change is viewed positively by industry experts, as it is expected to reduce deposit costs for banks.

The revisions are anticipated to particularly benefit banks with a higher proportion of corporate deposits, allowing them to negotiate rates directly with corporate clients.

The SBP has also amended the profit distribution framework for IBIs. The new guidelines dictate that IBIs must calculate profit on their PKR savings deposits based on the weighted average gross yield of their investment pools, excluding certain assets. This adjustment aims to enhance transparency and ensure competitive profit-sharing for depositors.

These changes reflect the SBP’s commitment to strengthening the Islamic banking framework and promoting ethical finance in Pakistan.