KARACHI: Every fortnight, the Government of Pakistan borrows enormous sums by auction — Treasury bills that mature in months, Pakistan Investment Bonds that run for decades, Ijarah sukuk for Shariah-compliant buyers. The bidders in the room are banks. Yet the securities being auctioned can belong, in law, to you: an individual saver in Multan, a small company in Gujranwala, a pension fund's member. The bridge is an account most bank customers have never been offered and would benefit from knowing by name — the Investor Portfolio of Securities account, the IPS account, through which your bank holds government securities at the State Bank in your name, while you receive the same auction yields as the institutions.
What an IPS account is
An IPS account is a custody account for government securities, opened at a scheduled bank or primary dealer, under the State Bank of Pakistan's framework for investor portfolios. The securities you buy are not kept at your bank. They are held in the bank's Subsidiary General Ledger Account — its SGLA — at the State Bank, in a sub-account identified as yours, and the State Bank's investor guidance is explicit about the consequence: you are the legal owner of the securities in your IPS account; the bank is your custodian and agent, not the owner and not your counterparty. That single design decision separates an IPS holding from almost everything else a bank sells you. A deposit is the bank's liability to you; an IPS security is your property, held for you, and your claim runs to the Government of Pakistan as issuer regardless of which bank operates the account.
Almost anyone with a rupee account can open one: the State Bank's guidance contemplates individuals and institutions alike, through primary dealers and scheduled banks offering the facility, with ordinary KYC documentation — identity card and tax number for individuals, constitutional documents and board authority for companies. The account is scripless: nothing is printed, nothing sits in a locker, and your evidence of ownership is the IPS statement your bank must provide, showing the securities held, their face value, maturity and the income credited.
The three securities it holds
Market Treasury Bills are the government's short borrowings: zero-coupon instruments issued at a discount to face value, in three-, six- and twelve-month tenors, in small multiples — bank product literature puts the denomination in multiples of Rs5,000 — sold at fortnightly auctions on a pre-announced calendar. You pay less than face value today; at maturity the government pays full face value; the difference is your return, with no interim payments to manage. Pakistan Investment Bonds are the long end: coupon-bearing bonds in tenors running from two years out to twenty and thirty, in larger denominations — multiples of Rs100,000 in the banks' published terms — paying profit half-yearly in the fixed-rate issues, with floating-rate variants whose coupons reset against a benchmark. Government of Pakistan Ijarah Sukuk complete the trio for Shariah-conscious investors: asset-based certificates issued through the same auction machinery, with periodic rental payments instead of interest.
All three share the features that make the IPS proposition interesting: issued under the public debt framework, serviced by the State Bank as the government's agent, tradable in the secondary market through your bank if you need to exit before maturity, and carrying no compulsory zakat deduction at source under the State Bank's guidance — income tax, by contrast, is deducted as the tax law in force prescribes. The catalogue is deliberately narrow. An IPS account is not a brokerage account and holds no shares, no corporate bonds and no mutual funds; it is a single-purpose vault for the sovereign's own paper.
How buying actually works: auctions and non-competitive bids
Institutions buy government securities by bidding competitively — naming the yield they will accept — in the State Bank's auctions, conducted for the government on published calendars: T-bill auctions on a regular fortnightly rhythm, PIB and sukuk auctions on their announced schedules. An individual cannot out-guess a bank treasury at that game and is not asked to. The system's answer is the non-competitive bid: you instruct your bank, before its cut-off ahead of the auction, to buy a stated face value in a stated tenor, without quoting a price. Your bid is filled at the weighted average yield — in effect, the average accepted price — of that auction's competitive bids for that tenor, and the result is announced with the auction result. You receive the market's own outcome, neither better nor worse for being small.
Settlement happens on the auction's settlement date: your bank debits your account for the purchase price — for a PIB, the auction price plus any profit accrued since the last coupon date, a detail that surprises first-time buyers until they see the first full coupon arrive — and the security appears in your IPS account. Thereafter the machinery is automatic. Coupons are credited to your linked bank account on their due dates; a maturing T-bill simply pays its face value into your account; and your bank provides periodic IPS statements against which you can verify every holding and payment. If you need to sell before maturity, you instruct your bank to sell into the secondary market at the prevailing price — which, for a PIB bought before a rise in interest rates, may be below the price you paid, the fundamental bond-market risk explained below.
IPS versus the alternatives on the same shelf
The IPS account's closest relatives clarify its niche. Against National Savings: both end in government paper, but National Savings pays administered rates on non-marketable certificates encashed under scheme rules, while IPS holdings earn live auction yields and are saleable at market prices — more market truth, in both directions. Against a money-market or income mutual fund: the fund buys substantially the same securities, then smooths, diversifies and manages them for a fee, offering daily liquidity at a published unit price; the IPS holder skips the fee and the manager, and takes the individual security's own maturity and price behaviour undiluted. Against holding government sukuk bought through the PSX auction channel: the instrument family is the same, but custody, statements and resale run through your broker and the CDC rather than your bank and the State Bank — a genuine operational choice, increasingly a matter of which relationship you already have.
One misconception deserves correction. An IPS account is sometimes marketed at branch level as though it were a special high-profit bank account. It is not an account that pays anything; it is a container. The return comes entirely from the securities you instruct the bank to buy into it, at the yields the auctions set — which is why two customers with IPS accounts at the same bank can earn entirely different returns in the same quarter, and why the meaningful questions to ask a bank are about its auction access, its charges schedule and its statement quality, not about "the IPS rate", which does not exist.
Costs, risks and the fine print
Banks levy charges for IPS services under their published schedules of charges — account maintenance and transaction-related fees appear in the State Bank's guidance as a disclosed feature of the system — and the amounts vary by bank, which makes the schedule a legitimate comparison point when choosing where to open the account. Tax is deducted on profit as the prevailing law provides, with the saver's filer status shaping the effective burden, as our guide to filer and non-filer status explains. On risk, be precise: the credit risk is the sovereign's, the strongest available in rupees, and holdings are your property at the central bank — but price risk is real for anything sold before maturity, and reinvestment risk is real for everything: a T-bill maturing into a falling-rate environment rolls into lower yields, and a ladder of tenors is the classic household defence, spreading maturities so only part of the portfolio reprices at any one time.
Operationally, the account rewards a little diligence. Confirm your IPS statement after each purchase rather than trusting the debit alone; record auction dates and tenors you have bid for, because a missed instruction is a missed fortnight; and note that secondary-market sales are executed at prices your bank obtains in the market — obtain the price basis before instructing, particularly for less-traded PIB tenors. Premature exit is a right, not a promise of profit.
Who the IPS account is really for
The natural IPS holder is the saver who has outgrown administered rates: someone parking a known sum for a known date — a tax payment, a house deposit, a child's admission year — who wants the government's yield rather than a bank's spread on it, and who values ownership in their own name at the central bank over the convenience of a single app balance. It is equally the gateway through which small institutions — schools, trusts, housing societies, provident arrangements — hold the same paper the banking system holds. If that description fits, the next step is unglamorous: visit a bank that offers the facility, open the account, place a first small non-competitive bid, and read the statement that comes back until every line is familiar. Rates, tenors, auction calendars and charges change — auctions are announced quarterly and terms are published by the State Bank and the banks — so verify current details before each purchase. This article is educational content, not financial advice, but the IPS account itself is as close as Pakistan's system comes to a public utility for savers: the state's own paper, in your own name, at the market's own price.
A worked example: one saver, one auction cycle
Make the machinery concrete with round, illustrative figures — not a quote of any real auction. Suppose a saver with Rs500,000 earmarked for a payment due in a year opens an IPS account and instructs her bank to place a non-competitive bid in the twelve-month T-bill at the next fortnightly auction. The auction's competitive bids settle at a weighted average discount that prices the bill, say, at roughly Rs89 for every Rs100 of face value — the bank buys Rs500,000 of face value for a debit of roughly Rs445,000, and the holding appears in her IPS statement at the State Bank. Nothing further happens for twelve months: no coupons, no statements full of activity, just ownership. At maturity, Rs500,000 is credited to her account; the difference is her return, earned at the auction's yield rather than at a branch's deposit board rate. Had she instead chosen a three-year PIB, the same purchase would have produced half-yearly coupon credits and a market price that wandered in between — visible on enquiry, irrelevant if held to maturity, decisive if sold early. The example's lesson is the account's character: all of the action is at the auction and at maturity, and the quiet in between is safekeeping, performed by the central bank.
Key takeaway: An IPS account lets you own T-bills, PIBs and government sukuk directly — held at the State Bank in your name, bought at auction yields through non-competitive bids — trading the comfort of administered rates for the market's own return, fees and price risk.
