The Islamabad High Court (IHC) has temporarily barred the government from collecting up to 15% additional taxes from banks that fail to meet private sector lending targets in 2024.
Nearly a dozen banks have sought relief from the Islamabad High Court, protesting against the levy introduced in the 2025 federal budget.
According to media reports, the Pakistan Banks Association has confirmed the temporary exemption issued by the court to these financial institutions.
The Independent High Authority for Elections, headed by Judge Baber Sattar, issued an order stating: “Until the date of the next hearing, no coercive action will be taken against the complainant on the basis of any calculations made by the Tax Department.”
The case is scheduled to be heard from December 3, although the timeline for a final ruling remains uncertain.
The banks that received the exemption include Meezan Bank Limited, MCB Bank Limited, Askari Bank Limited, Standard Chartered Bank of Pakistan Limited, Habib Metropolitan Bank Limited, and the Pakistani unit of Citigroup Incorporated, among others.
The government imposed an additional tax in the 2025 federal budget to encourage banks to lend at least 50% of their deposits to the private sector by December 31, 2024.
However, the average advance-to-deposit ratio (ADR) of banks operating in Pakistan recently stood at only 38%, which is well below the mandatory threshold. As a result, banks were expected to pay approximately Rs 197 billion in additional taxes.
Despite these obstacles, bank lending to the private sector is expected to improve next year with expected economic stability. The government also signaled a shift in its strategy for calculating ADR. From next year, average interest rates will be evaluated based on an average for the entire year rather than a snapshot of a single day on December 31. This amendment is expected to encourage continued lending from the private sector and reduce reliance on year-end performance.