Karachi: Pakistani banks have begun implementing monthly fees on large savings accounts to meet the government’s Advance-to-Deposit Ratio (ADR) requirements and avoid additional taxes. The policy is aimed at boosting private sector lending, a critical component of the country’s broader fiscal strategy under its $7 billion International Monetary Fund (IMF) loan program.
The Federal Board of Revenue (FBR) has mandated a 50% ADR threshold for banks by the year end. Falling short of this target could result in penalties. Currently, the sector’s ADR stands at 44%, with none of the 11 major banks meeting the required benchmark, according to data from JS Global Capital Ltd.
Several banks have introduced fees targeting high-balance accounts to comply with these regulations:
Meezan Bank Ltd.: A 5% monthly fee on savings accounts with balances exceeding PKR 1 billion ($3.6 million). MCB Bank Ltd.: A 5% fee on savings and current accounts holding over PKR 3 billion.
Faysal Bank: A flat 5% fee on all checking accounts with balances of PKR 5 billion or more.
Askari Bank: A 5% fee on accounts with balances of PKR 1 billion or above.
JS Bank: Effective December 20, 2024, a 5% fee will apply to savings accounts with balances of PKR 2 billion or more.
Habib Bank Ltd. (HBL) and Bank of Punjab (BoP): Announced similar fees earlier this week.
This trend began with Bank Alfalah on November 15, and other banks have followed suit to align with government directives.
The ADR policy is designed to incentivize banks to shift from relying on deposits for investment in government securities to lending actively to the private sector. The Profit publication explains that a healthy ADR reflects a bank’s engagement in economic growth by extending loans to businesses and individuals rather than parking deposits in low-yield government investments.
“Banks are aggressively pursuing lending targets while discouraging large deposits to avoid higher taxes,” said Suleman Rafiq Maniya, a Karachi-based wealth manager. “They can’t openly discourage deposits, so they are introducing fees as a deterrent.”
This move aligns with Pakistan’s ambitious plan to increase revenue by 40%, a key requirement of the IMF’s loan program. As banks play a critical role in this strategy, the government is pushing lenders to deploy more capital into private sector loans, fostering economic activity and growth.
While some banks have sought temporary court relief, they argue that tax penalties encroach upon their regulation by the central bank. Nonetheless, the imposed fees underscore the ongoing shift in banking operations, prioritizing lending over traditional deposit-based models.
The newly introduced fees are expected to impact high-net-worth individuals with large savings, reshaping deposit inflows across the banking sector. These measures reflect the challenging balance between regulatory compliance, fiscal goals, and customer satisfaction in Pakistan’s evolving financial landscape.
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