KARACHI: The banking deposits of private sector slid eight percent to Rs2.312 trillion during the last seven months as businessmen withdrew funds to improve their balance sheets and avert withholding tax.
The State Bank of Pakistan (SBP) data on Monday showed that the private sector banking deposits came down Rs200 billion till January-end from Rs2,511 billion as on June 2015. Analysts attributed the fall to seasonal deposits pattern of the banking system and imposition of withholding tax on non-banking transactions.
The analysts said usually the financial institutions build their deposit base by December end to improve their balance sheets and withdrawal in subsequent year is normal.
They said imposition of withholding tax of 0.3 percent on non-cash banking transactions also corroded the deposit base. The analysts said small traders and other business concerns made large withdrawals after the imposition of the levy since July 01, 2015.
They estimated the introduction of voluntary tax compliance scheme (VTCS) will help the banking system to strengthen the deposit base as the scheme offers reduced income tax on registration.
A report suggested that the government estimated around Rs250 billion to be declared under the scheme.
Deposits of textile industry witnessed a significant decline of 22 percent to Rs96.3 billion as compared to Rs123.61 billion.
The deposits by manufacturing sector decreased 4.35 percent to Rs637 billion from Rs666 billion.
The outstanding position of total deposits of banking system was at Rs9.206 trillion at the end of January as compared to Rs9.153 trillion by the end of June 2015, depicting 4.35 percent growth.
The SBP data showed that the growth was also witnessed in the deposits of non-residents – foreign as well as local currency deposits – to Rs107 billion from Rs95 billion. Deposits of residents – including government, non-financial public sector enterprises, non-bank financial institutions and private sector – inched up to Rs9.098 trillion from Rs9.057 trillion.
