KARACHI - Anticipating a substantial decline in discount rate this year, the domestic banks have reduced sharply the rate of return on the fixed deposits. A few months ago the banks offered up to 14 per cent rate of return on fixed deposits but from March the banks have started offering a single digit profit on the deposits to be mobilised from the investors under the fixed term schemes, The Nation learnt on Thursday. "We are now offering only 8 to 9 per cent rate of return on the deposits to be generated through the fixed deposits," a senior banker told The Nation. As the discount rate is expected to squeeze into single digit by November or December this year, it would be impossible for the banks to provide 13 to 14 per cent rate of return on the fixed deposits, he said. The banks have mobilised billions of rupees deposits by offering lucrative rate of return, ranging up to 14 per cent that was stunning for many experienced bankers. It was learnt that the National Saving Schemes and the fixed term deposits of the banks were the two major components that attracted billions of rupees deposits from the investors, including the general public, bankers said. The stock market and the real estate were under serious recession and crisis and the investors found it a sound and safe opportunity to put their money into the lucrative fixed term deposit schemes of the banks during the past few months, they added. Worth noting is that the KIBOR had already squeezed to below 14 per cent, after touching 16 per cent and the current discount rate of 15 per cent is also expected to be reduced by 200 to 250 basis points next month when the State Bank Governor would announce the new quarterly monetary policy, a banker said. In January 2009 the total deposits of the scheduled banks surged by 51 billion rupees and amounted to 3.852 trillion as compared to 3.801 trillion rupees in December 2008. During the calendar year 2008 the scheduled banks' deposits reflected a marvellous growth of 236 billion rupees and mounted to 3.801 trillion from 3.565 trillion in December 2007. In December 2008 the deposits of the banks fell below the level of May 2008, when the scheduled banks had reported 3.832 trillion rupees worth deposits as the rapid devaluation of rupee led to dollarisation in the country while flight of capital amid rumours of defaults also caused a serious blow to the deposits. In the month of October 2008 the banks reported outflow of about 96 billion rupees mainly because of baseless speculations relating to bank defaults. Pakistani currency had lost its value by more than 25 per cent against the US dollar and other major currencies from July-November period of 2008. Capital market sources said that the abrupt depreciation of rupee motivated the depositors to convert billions of rupees into the US dollars and other major currencies. Meanwhile, State Bank of Pakistan has pointed out in its new report that the banks' account holders pulled out about 96.80 billion rupees from banks in the month of October last year amid a flurry of speculations of the freezing of accounts, lockers and default by some banks. Sources also said that a recession was being seen in all economic and business spheres in the country as a result the growth in the deposits of the banks in 2008 was far less than the preceding calendar year. According to SBP report, the deposits reflected a major upsurge in last five years, from 2003 to 2007, because of massive increase in the inflow of remittances, boom in the industrial and business activities. In 2002 the deposits with the scheduled banks stood at 1.532 trillion which surged to 1.793 trillion in 2003, 2.161 trillion in 2004, 2.661 trillion in 2005, 2.999 trillion in 2006, 3.565 trillion in 2007. In 2008 the deposits further reflected a growth of 236 billion rupees, but the growth was far below the level of the year 2007. In 2008 the economy and overall business faced a serious slump because of global and domestic crisis, said sources, adding in 2009 the deposits could show a marvellous growth as the economy was moving towards growth and stability after the approval of the IMF loan and higher disbursements by the donors. However, while giving the earning outlook for the banking sector financial analysts project that the deposit and advances growth of the scheduled banks would be 5 percent and 6 percent respectively in 2009. Resultantly sector profits are likely to decline by 15 percent in CY09.