How banks set profit rates
A bank pays you profit for keeping money with it. Most rates in the market follow the policy rate, which is the benchmark rate set by the State Bank of Pakistan (SBP) through its Monetary Policy Committee.
The latest decision we checked: SBP policy rate raised by 50 bps to 12% with effect from 27.10.2026 (MPC).
When the policy rate goes up, banks usually raise their deposit rates. When it goes down, they usually cut them. Rates on savings accounts often change soon after an SBP decision. A term deposit rate is normally fixed when you open the deposit and stays the same until maturity. For background on SBP decisions, see SBP rates and economy.
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PLS savings accounts
A PLS (profit and loss sharing) savings account is the standard savings account at a conventional bank. You can deposit and withdraw at any time, and the bank pays profit on your balance.
Points to check with your bank:
- Profit calculation basis. Banks calculate profit on the daily, average or minimum monthly balance. Profit on the minimum monthly balance pays less if your balance drops during the month.
- Payout frequency. Banks credit profit monthly, quarterly or half-yearly, depending on the product.
- Balance tiers. Many banks pay a higher rate only above a set balance.
- Conditions. Some accounts limit withdrawals or charge fees when the balance falls below a minimum.
The SBP minimum profit rate rule
SBP rules require conventional banks to pay at least a minimum profit rate on savings deposits, and this floor is linked to the SBP policy rate. The exact formula, the accounts it covers and whether it applies to Islamic banks are set in SBP circulars. These rules change. Read the current circular on the SBP website before you rely on a figure. If your bank pays less than the floor on an eligible account, ask the bank to explain, then contact SBP's complaint channel.
Term deposits (fixed deposits)
A term deposit, also called a fixed deposit or TDR (term deposit receipt), locks your money for a fixed period at an agreed rate. Banks offer short and long terms. Longer terms do not always pay more: when banks expect rates to fall, short terms can pay more than long ones.
What to compare:
| Feature | What to ask |
|---|---|
| Rate | Is it fixed for the full term? |
| Profit payout | Paid monthly, quarterly or at maturity? |
| Early withdrawal | Is there a penalty, or a lower rate if you break the deposit early? |
| Rollover | Does the deposit renew automatically, and at what rate? |
| Minimum amount | What is the smallest deposit accepted? |
Profit paid at maturity, or added back to the balance, compounds. You earn profit on earlier profit. Profit paid out monthly does not compound unless you reinvest it yourself.
Use the calculator below to compare simple and compound profit, add top-ups, deduct tax on profit and see the effective annual rate:
Fill in the empty fields to see the result.
Simple: P × r × t. Compound: interest is added to the balance each period; effective annual rate = (1 + r/n)^n − 1. Tax is withheld each time interest is credited.
Islamic savings accounts and deposits
Islamic banks and Islamic windows of conventional banks run deposits on Shariah contracts, mostly Mudarabah. Under Mudarabah, you and the bank share profit at an agreed ratio, and losses fall on the capital provider. Islamic banks do not promise a fixed rate in advance. They announce expected profit rates and weightages for each product and period, and you can find these on the bank's website.
Profit can differ from what you expected, because it depends on the bank's actual earnings from its financing pool. For more context, see Islamic finance and Payments, tax, Islamic banking.
Tax and Zakat on profit
Banks deduct withholding tax on profit at source. The rate depends on whether you are on the FBR's Active Taxpayers List (ATL). Non-filers pay a higher rate. Check the current rates on the FBR website or with your bank, and enter the correct rate in the calculator above.
For Muslim account holders, banks may deduct Zakat from savings account balances. If you are exempt, you can submit a declaration to the bank. Ask your branch for the current process.
Deposit protection (DPC)
The Deposit Protection Corporation (DPC) insures eligible deposits at member banks. If a member bank fails, DPC pays depositors up to a set limit. Deposits above the limit are not covered. The limit, eligible account types and member banks are explained on our Deposit Protection (DPC) page. Confirm current figures on the DPC website.
Is there a "best" savings account?
No single account suits everyone. The right choice depends on your situation:
- how soon you may need the money
- your balance size
- whether you need a Shariah-compliant product
- your tax status
Compare the after-tax profit, not the headline rate. Also compare banks with government options such as National Savings schemes and T-bills and PIBs. For an overview, see Savings and deposits and Saving, Investing, Loans.
Keep inflation in mind. If inflation runs above your after-tax rate, your money loses buying power even though the balance grows. Bank deposits also carry less risk than leveraged forex or CFD trading, where you can lose money fast. That kind of trading is a separate topic, covered under Risk management.
Frequent questions
Are bank profit rates in Pakistan fixed?
Savings account rates can change at any time, usually after an SBP policy decision. Term deposit rates are normally fixed for the term. Islamic deposits pay an expected rate, and actual profit can differ.
What is the difference between a savings account and a term deposit?
A savings account lets you withdraw at any time but its rate can change. A term deposit locks your money for a set period, usually at a fixed rate, and may charge a penalty for early withdrawal.
Does the SBP minimum profit rule apply to all accounts?
It covers savings deposits as defined in the current SBP circular. Check the circular on the SBP website for coverage and the current formula.
Is tax deducted from bank profit?
Yes. Banks deduct withholding tax at source, and the rate depends on your ATL status. Check current rates with the FBR or your bank.
Is my money safe if a bank fails?
Eligible deposits at DPC member banks are insured up to a limit. See Deposit Protection (DPC) for details.
How do I compare a bank deposit with National Savings?
Compare after-tax returns for the same period. Use the calculator on this page and the Profit calculator for National Savings products.