December 11, 2024 (MLN): To address the issue of Advance to Deposit Ratio (ADR) in the banking sector, the Deputy Prime Minister and Foreign Minister, Senator Mohammad Ishaq Dar, chaired a high-level meeting on Tuesday.
The meeting was attended by key officials, including the Minister of State for Finance, the Governor of the State Bank, and the Chairman of the Federal Board of Revenue.
They discussed the use of ADR (Asset-to-Deposit Ratio) policy is enhance lending to productive sectors of the economy, which in turn supports economic growth.
They highlighted its positive impact on tax revenue targets and the creation of an optimal environment for the banking sector, fostering a more dynamic and productive financial ecosystem.
The government, vide Finance Act 2022, had introduced higher tax rates on investment income for banks with ADR ratio below 50 %.
However, this tax aims to increase commercial lending and tax passive income at a higher rate being an income from non-exertion.
In the current quarter of 2024, the banking sector is working to raise the ADR to avoid higher taxation, with alternative options to the ADR-based tax regime discussed in the meeting.
