(Bloomberg) -- Pakistan’s banks are adding new fees on some savings accounts to discourage inflows of deposits as they seek to boost their loan-to-deposit ratio to avoid a punitive tax from the government.
Meezan Bank Ltd., the nation’s largest lender by profit, said on Wednesday it will impose a monthly fee of 5% on savings accounts with balances higher than 1 billion rupees ($3.6 million). JS Bank Ltd. also issued a notice on the same day, following similar moves from rivals including Habib Bank Ltd. and MCB Bank Ltd. earlier in the week.
The nation’s tax authority plans to impose a levy on banks should their loans to the private sector fall below 50% of deposits by the end of the year. While about a dozen banks in Pakistan secured a temporary relief from the court, the move was met with resistance from lenders who argued that the government can’t impose a tax as they are supervised by the central bank.
The banking sector has seen a sharp rise in gross advance-to-deposit ratio to 44%, according to data until October 25 compiled by Karachi-based JS Global Capital Ltd. None of the 11 major banks hit the 50% criteria at the end of the third quarter, said a separate report by the brokerage house.
“Most banks are in a race to avoid higher taxes with banks discouraging deposits and aggressively lending,” said Suleman Rafiq Maniya, an independent wealth manager in Karachi. “Banks can’t ask you officially not to put money in. The only way is to impose a fee.”
The tax bureau’s proposal comes as the South Asian nation wants to boost its revenue by a record 40% as part of the $7 billion loan program with the International Monetary Fund.
(Corrects story published Nov. 20 to remove Standard Chartered Pakistan’s name as it didn’t impose a fee)
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