Pakistani banks are adding new fees on some savings accounts to discourage deposit inflows, as they seek to boost their loan-to-deposit ratio to avoid a punitive tax from the government.
Meezan Bank Limited, the country’s largest bank by profit, said in an email to its customers that it would impose a 5% monthly fee on savings accounts with balances above 1 billion rupees ($3.6 million).
GS Bank Limited and Standard Chartered Bank Pakistan Limited also issued notices, following similar moves from rivals including Habib Bank Limited and MCB Bank Limited earlier in the week.
The Federal Board of Revenue (FBR) plans to impose a tax on banks if their loans to the private sector fall below 50% of deposits by the end of the year. While about a dozen banks in Pakistan received temporary relief from the court, the move was met with resistance from lenders who argued that the government could not impose a tax because it was subject to the supervision of the central bank.
The banking sector saw a sharp rise in its gross advances-to-deposits ratio to 44%, according to data till October 25 compiled by Karachi-based JS Global Capital Ltd. None of the 11 major banks ultimately achieved the 50% benchmark. For the third quarter, according to a separate report issued by the brokerage house.
“Most banks are in a race to avoid tax hikes, as banks are aggressively discouraging deposits and lending,” said Sulaiman Rafiq Mania, an independent wealth manager in Karachi. “Banks can’t formally ask you not to deposit money. The only way is to charge fees.”
The tax office’s proposal comes as the South Asian country wants to boost its revenues by a record 40% as part of a $7 billion loan program with the International Monetary Fund.