Government to enhance deposits to GDP ratio to 55 percent under NFIS

The government plans to enhance deposits to GDP ratio to 55 percent under the National Financial Inclusion Strategy (NFIS) and recommendations in the plan were also endorsed by the sub-committee of Economic Advisory Committee (EAC) in its meetings held on October 30, 2018 and November 17, 2018.
The NFIS uploaded by the Finance Ministry on its website has been developed after comprehensive industry wide consultation, while specific timelines and responsibilities have been allocated against each target. The recommendations in the plan were also endorsed by the Economic Advisory Committee (EAC) sub-committee in its meetings held under the chairmanship of finance minister on October 30, 2018 and November 17, 2018.
The government wants to enhance usage of digital payments to 65 million active digital transaction accounts, with gender segregation of 20 million accounts by women by 2023. The other priority targets are to promote SME Finance (Extend finance to 700,000 SMEs, 17 percent of the private sector credit) and to increase agricultural finance (serve 6 million farmers through digitalised solutions and to enhance annual disbursement to Rs 1.8 trillion.
The share of Islamic Banking would be increased to 30 percent of the banking industry, and it is also envisioned that implementation of the five year plan can translate into creation of 3 million new jobs, and additional exports of $ 5.5 billion through enhanced access to finance to SMEs. Furthermore, the plan also includes a strategy to increase the deposit base of banks to 55% of GDP and encourage higher savings.
A key assumption in this respect is to allow reduced income tax (20%) on income earned by commercial & microfinance banks on SMEs, housing & underserved areas for priority sectors. The plan of actions is to enhance usage of digital payments by ensuring 100 percent digitalisation of government payments & receipts along with back-end automation, digitalisation of Pakistan Post as well as Central Directorate of National Savings (CDNS) and this can be achieved by creation of transformation office at Prime Minister Secretariat and launching fully functional Assan Mobile Account (AMA) Scheme.
The strategy to enhance deposit base to 55 percent of GDP is that banks will develop innovative and specialised products for targeted segments to encourage deposit, expand outreach of banks' branches in rural and semi-urban areas and facilitate fully functional digitised echo system to attract savings underserved and hard to reach areas to promote SME finance.
Promotion of Financial Inclusion through Low Cost Housing Finance will be done by defining low cost housing finance and implementation of Financial Institutions (Recovery of Finances) (Amendment) Act, 2016. General reserve requirements will be withdrawn, capital adequacy requirement (CAR) to be reduced and the loan to value (LTV) ratio to be relaxed. Bank/DFI's exposure in low-cost housing will not be included in exposure limit and standardisation and simplification application forms.
Promotion of Financial Inclusion through Islamic finance will be done by developing roadmap for promotion of Islamic banking industry, providing enabling legal & regulatory environment and efficiency in liquidity management as well as awareness raising & capacity building.