Pakistan’s banks impose fees on deposits to avoid govt tax: report
Pakistan’s banks are adding new fees on some savings accounts to discourage deposit outflows as they seek to boost their loan-to-deposit ratios to avoid punitive taxes from the government.
Meezan Bank Ltd., the country’s largest lender by profitability, said in an email to its customers that it will impose a 5% monthly fee on savings accounts with balances above 1 billion rupees ($3.6 million).
JS Bank Ltd and Standard Chartered Bank Pakistan Ltd also issued notices following similar moves by rivals including Habib Bank Ltd and MCB Bank Ltd earlier in the week.
The Federal Board of Revenue (FBR) plans to levy levy on banks if their loans to the private sector fall below 50 percent of deposits by the end of the year. While about a dozen banks in Pakistan got temporary relief from the court, the move was met with resistance from lenders who argued that the government could not impose the tax because they were under the supervision of the central bank.
According to data compiled by Karachi-based JS Global Capital Limited as of October 25, the overall advance-to-deposit ratio in the banking sector has increased sharply, at 44 percent. of the third quarter, said a separate report by the brokerage house.
“Most banks are in a race to avoid high taxes and banks discourage deposits and lend aggressively,” said Sulaiman Rafique Manya, an independent wealth manager in Karachi. “Banks cannot formally ask you not to deposit money. The only way is to charge a fee.”
The tax bureau’s proposal comes as the South Asian nation seeks to boost its revenue by a record 40 percent as part of a $7 billion loan program with the International Monetary Fund.
