ISLAMABAD: Commercial banks across Pakistan have formally proposed an additional 5% interest margin on lending rates, citing significant increases in insurance premiums and operational expenditures.
The request comes amid growing economic challenges and global geopolitical uncertainties that have placed pressure on banking sector margins.
According to sources within the banking industry, the additional margin is being positioned as a necessary buffer to offset financial risks and regulatory compliance burdens that have intensified over the past year.
The demand has been submitted to regulatory authorities, including the State Bank of Pakistan (SBP), as part of a broader proposal for risk-adjusted pricing mechanisms.
Geopolitical Uncertainty, Inflation Driving Cost Surge
Senior banking executives argue that the cost of doing business has risen sharply due to inflation, currency volatility, and increasing security and cyber insurance costs.
“Insurance premiums for asset protection and cyber-risk have gone up by over 30% in the past year alone,” said a banking sector official who requested anonymity.
He added that geopolitical developments, particularly tensions in the Middle East and disruptions in international trade, have added new layers of financial risk that require stronger internal buffers.
Banking officials also noted that branch-level operational costs, including energy, staffing, and compliance protocols, have spiked significantly.
They claim the additional 5% margin would not be blanket-applied but could be integrated selectively depending on borrower risk profiles and loan tenure.
SBP Yet to Respond, Borrowers Express Concern
The SBP has not issued a formal response to the banks’ proposal yet.
However, consumer groups and business borrowers have voiced concern over the potential impact of higher lending rates on credit affordability and investment growth.
“If accepted, this move will further increase the cost of capital for SMEs and individual borrowers already struggling with high interest rates,” said an industry analyst.
The final decision is likely to follow stakeholder consultations and a comprehensive impact assessment by the central bank.
