ISLAMABAD (PEN) : The Islamabad High Court (IHC) has temporarily halted the government from collecting a 15% additional tax from banks that fail to meet the private sector lending targets for 2024. This move comes after nearly a dozen banks challenged the tax, which was introduced as part of the federal budget for 2025.
According to media reports, the Pakistan Banks’ Association confirmed that the court had granted interim relief to these financial institutions. The IHC, led by Judge Babar Sattar, issued an order stating that no coercive actions would be taken against the petitioning banks based on the tax department’s calculations until the next hearing.
The case is set to be heard on December 3, although a timeline for a final decision remains uncertain.
Among the banks that sought relief are Meezan Bank, MCB Bank, Askari Bank, Standard Chartered Bank Pakistan, Habib Metropolitan Bank, and Citigroup’s Pakistani branch, along with several others.
The additional tax was introduced to encourage banks to lend at least 50% of their deposits to the private sector by December 31, 2024. However, many banks are currently falling short of this target, with the average advance-to-deposit ratio (ADR) standing at just 38%, well below the required threshold. As a result, the banks were facing an additional tax burden of around Rs 197 billion.
Despite these challenges, there is hope for improvement in private sector lending next year, as the government anticipates economic stability. In a move that could alleviate some pressure, the government has also indicated a change in how the ADR will be calculated starting next year. Instead of being assessed on a single day (December 31), the ADR will now be calculated based on a full-year average, which is expected to provide more flexibility and encourage consistent lending throughout the year.
