ISLAMABAD: A high-level meeting was held Tuesday under the chairmanship of Deputy Prime Minister/Foreign Minister Senator Mohammad Ishaq Dar, to address the issue of Advance to Deposit Ratio (ADR) in the banking sector.

The meeting was attended by the minister of state for finance and revenue, governor State Bank, secretary finance, chairman of the Federal Board of Revenue (FBR), and other senior government officials.

The participants discussed the use of ADR policy on the overall lending to productive sectors of economy, its impact on tax revenue targets and optimum environment for banking sector.

Banks’ ADR recorded at 47pc as of Nov 15th

The government, vide Finance Act 2022, had introduced higher tax rates on investment income for banks with ADR ratio below 50 percent. This tax aims to increase commercial lending and tax passive income at higher rate being an income from non-exertion.

In the current quarter of 2024, the banking sector has been attempting to increase the ADR to avoid higher taxation. Alternative options to ADR-based tax regime were discussed in the meeting.

Copyright Business Recorder, 2024