A Comparative Analysis of Profit Rates on Deposit in Islamic and Conventional Banks in Pakistan

Abstract

Abstract Views: 406

This study uses five Islamic banks (IBs) and four conventional banks (CBs) in Pakistan. The data used for the study are secondary data and monthly data ranging from 2008 to 2017 collected through websites of Islamic and conventional banks in Pakistan. This study examined weather there is difference in Islamic and conventional banks profit rates offered to customer, weather, Islamic or conventional banks offer high return rate to their customers on deposits. It also aims to analyze the relationship between inflation rate and profit rates on deposit weather customer are in profit or loss in real sense. The analysis is done on saving account and one-year term deposit account of both banks and inflation rate in the economy. In this study t-test technique is used to check whether there is significant difference in monthly profit rates of Islamic and conventional banks. The study reveals that in the Saving Account, conventional banks offer high return to their customers and one-year term deposit account Islamic banks offering high return to their customers. The comparison of profit rates with inflation rate concluded both Islamic and conventional banks offer low return on savings account to the customer, and on one-year term deposit account, Islamic banks offer high return than inflation rate, but conventional banks offer slightly lower returns than inflation rate.