What exactly is the policy rate?
Banks constantly borrow and park money for very short periods, with the State Bank and with each other. The policy rate is the benchmark around which all of that short-term borrowing is priced.
Think of it as the base price of money for the whole banking system. When the State Bank raises the policy rate, money becomes more expensive for banks; when it cuts, money becomes cheaper. That change then flows, step by step, into the rates you actually see as a customer.
The policy rate does not travel alone: the corridor
Alongside the policy rate, the State Bank sets two more rates that together form a band, called the interest rate corridor. The ceiling is the rate at which banks can borrow overnight from the State Bank. The floor, SBP’s Floor Rate, is the rate at which banks can park surplus funds with it. The policy rate normally sits between the two.
This is not trivia. As you will see below, the Floor Rate is directly wired to the minimum profit rate your savings account must pay.
Who sets it, and when?
The policy rate is set by the Monetary Policy Committee (MPC) of the State Bank of Pakistan; in SBP’s own Urdu communications the committee is زری پالیسی کمیٹی. The MPC meets on dates SBP publishes in advance: the calendar for financial year 2026-27 lists eight meetings.
See the full meeting calendar at sbp.org.pk.
Each decision is announced in a Monetary Policy Statement explaining whether the rate went up, down or stayed put, and why. The decision weighs inflation, economic conditions and external pressures.
Two Dates Most Coverage Ignores
Two further dates are worth knowing.
Where It Stands
As of 15 September 2026
The MPC held the policy rate unchanged at its 14 September 2026 meeting.
For the latest figures and meeting dates, see the State Bank of Pakistan’s website.
Source: sbp.org.pk, 15 Sep 2026
The policy rate in Urdu, and the words around it
In its Urdu announcements, SBP writes the policy rate as پالیسی ریٹ. Urdu news headlines often report the same decision as “شرح سود” (interest rate), and English media often say “the interest rate”. Same number, same announcement.
What changes for a customer are two different rates.
The rest of this guide is about those two.
How a policy rate change reaches your money
The transmission works in steps, not overnight:
The General Pattern
Two caveats worth remembering:
The pass-through takes time and differs by product, and every product has its own terms, so always check the current rate on the product page or with your branch.
Is there a minimum profit rate your savings account must pay?
Yes, and very few savers in Pakistan know it. The State Bank requires banks to pay a minimum profit rate on rupee savings deposits. Since 1 August 2026 the rule covers individuals with a monthly average balance of up to PKR 10 million.
It is written against SBP’s Floor Rate, not the policy rate. The minimum sits 50 basis points below the Floor Rate, the bottom of the interest rate corridor.
Four Details That Matter in Practice
What That Works Out To
With the Floor Rate at 10.50%, the regulatory minimum profit rate is 10.00% per annum on eligible individual savings balances. That is arithmetic on two published SBP figures, not an Allied Bank product rate. For your account’s actual rate, see the product page or ask your branch.
Regulatory references: BPRD Circular No. 07 of 2013, BPRD Circular No. 05 of 2014, BPRD Circular No. 05 of 2024 and BPRD Circular Letter No. 15 of 2026.
If you are a saver
The policy rate’s direction matters most when you are choosing between keeping money idle and locking a deposit:
A Purely Hypothetical Example
To show the arithmetic only:
Rs 100,000 at a 10% annual profit rate would earn about Rs 10,000 in a year.
That 10% is an illustration, not a product rate; for actual current rates see Allied Bank’s savings and term deposit pages.
If you are borrowing or financing
For car, home or business financing the logic runs the other way. On conventional financing, the price you pay is the markup rate. Most variable-rate financing in Pakistan is priced off KIBOR, which tracks the policy rate’s direction. When the policy rate rises, new financing gets costlier and many existing variable-rate installments adjust upward over time; when it falls, the burden eases. If you are planning financing, it is worth thinking about where the rate cycle is, not just today’s installment. Three things to check in any agreement: which KIBOR tenor it uses, the margin over KIBOR, and how often it reprices.
What about Islamic deposits?
Islamic deposits do not pay interest; they distribute business profit under Shariah-compliant structures, supervised by Shariah boards under SBP’s governance framework.
The regulator treats them separately too: profit sharing on Islamic savings deposits sits under its own SBP circular rather than the conventional minimum-profit-rate rule described above.
In practice, the economic environment the policy rate shapes also influences the profit those deposits distribute; the mechanism differs, the direction usually rhymes.
Allied Aitebar Islamic Banking’s FAQ covers how this works in detail. Read the FAQ
What this means for you
The policy rate is not an abstract number for economists. It is the tide your savings and your installments both float on. After every MPC announcement, one glance at the direction tells you a lot. Up, down or unchanged points to whether deposit offers should strengthen or financing should get cheaper. It also helps you time decisions such as locking a term deposit. SBP publishes the announcement dates in its advance calendar.
Next step: compare Allied Bank’s savings and term deposit options, or talk to your nearest branch about what fits your horizon. (CTA link: https://www.abl.com/personal/savings-and-term-deposits/)
General information only. The policy rate, KIBOR and profit rates change over time; the current values are on the State Bank of Pakistan and Allied Bank websites. Product terms and charges are governed by Allied Bank’s prevailing Schedule of Charges.
Frequently Asked Questions
Q. What is the SBP policy rate in simple words?
It is the State Bank of Pakistan's benchmark rate, the base price of money for the banking system. Deposit profit rates and financing rates gradually follow its direction.
Q. What is the current policy rate in Pakistan?
As of 15 September 2026 it is 11.50% per annum, held unchanged at the MPC's 14 September 2026 meeting. Check sbp.org.pk for the latest figure, since it can change at any MPC meeting.
Q. Who decides the policy rate?
The State Bank of Pakistan's Monetary Policy Committee, which meets on a pre-published calendar and issues a Monetary Policy Statement after each decision. Eight meetings are scheduled for financial year 2026-27.
Q. When is the next monetary policy announcement?
SBP publishes the MPC meeting dates in advance on its website. Check its calendar there, since SBP can revise the dates.
Q. What is the interest rate corridor?
re, since SBP can revise the dates. What is the interest rate corridor? A band set by SBP around the policy rate: a ceiling at which banks borrow overnight from the State Bank and a floor, the Floor Rate, at which they park surplus funds with it.
Q. How long do defaults stay visible?
Reported conduct forms your history, and lenders weigh recent conduct most heavily. The exact retention rules sit with the State Bank and the bureaus. In practice, clean recent years steadily outweigh an old problem.
Q. Is there a minimum profit rate on savings accounts in Pakistan?
Yes. SBP requires a minimum profit rate on rupee savings deposits, set 50 basis points below the Floor Rate and calculated on your average monthly balance. Term deposits are excluded, and since 1 August 2026 the requirement covers individuals with a monthly average balance of up to PKR 10 million.
Q. What is the difference between the policy rate and KIBOR?
The policy rate is set by the MPC; KIBOR is the interbank benchmark that moves with it and is used to price much of Pakistan's variable-rate financing.
Q. Does a policy rate hike increase my deposit profit?
Generally deposit profit rates strengthen in a rising-rate environment, but the effect is gradual and product-specific. Check the live rate on the product page.
Q. Does the policy rate affect foreign currency deposits?
No. Foreign currency (FCY) products are not affected by policy rate changes.
Q. Does a policy rate hike increase my existing installment?
If your financing is variable-rate (typically KIBOR-linked), your installment can adjust over time. Check your agreement's repricing terms.
Q. What is the policy rate called in Urdu?
SBP's Urdu writes پالیسی ریٹ. Urdu news headlines often call the decision "شرح سود". For savers, the rate it moves is the profit rate, شرحِ منافع; for conventional borrowers, the markup rate, مارک اپ کی شرح.
Q. How do Islamic deposits earn if there is no interest?
Through Shariah-compliant profit distribution supervised by Shariah boards, as explained in the Allied Aitebar Islamic Banking FAQ.