Pakistani banks start withdrawing taxes on accounts having PKR 3 billion or above
Banks had decided to impose tax in range of 5% to 6%
Banks in Pakistan have started withdrawing additional taxes that they planned to collect from depositors having balance in excess of PKR 3-6 billion.
The State Bank of Pakistan (SBP) has introduced changes in profit calculation on savings account for conventional and Islamic banks, effective January 1, 2025.
For conventional banks, SBP decided that the Minimum Profit Rate requirement will no longer apply to deposits held by financial institutions, public sector enterprises and public limited companies.
This appeared to be a relief for banks, in light of which the banks that had decided to impose tax in range of 5-6% have now decided not to impose any tax.
The tax was planned to be levied on the balance of PKR 3-6 billion held with the depositors, which now stands withdrawn with immediate effect.
According to report of Arif Habib Ltd for conventional banks, the removal of the Minimum Deposit Rate (MDR) on savings deposits held by financial institutions, public sector enterprises, and public limited companies is expected to have a favorable impact on the banks bottom-line.
On average, this regulatory change could lead to an increase of 7.5-22% in the earnings of several banks for the CY25.
The exact impact will depend on the exposure each bank has to such deposits, as banks with a higher proportion of deposits from these sectors are likely to benefit more significantly from this relaxation, the report said.
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