Banks Achieve 44% Gross ADR in Race to Avoid Paying Additional Govt Taxes

The Banking Sector’s Gross Advance to Deposit Ratio (ADR) has now increased to 44 percent as of October 25, 2024, from 39 percent recorded on September 27, 2024. Gross advances increased by 11 percent to Rs. 13.4 trillion while deposits declined by 1 percent to Rs. 30.5 trillion as of October 25, 2024, Topline Securities said in a brief market alert. To recall, the government has imposed an additional tax on banks if they fail to meet a 50 percent ADR threshold by December 2024. As of October 25, the banking sector’s ADR now stands at 44 percent. As of June 30, 2024, only 3 out of 19 listed banks, which include Samba Bank (SBL), Faysal Bank (FABL), and Askari Bank (AKBL), have a gross ADR above 50 percent. It could be difficult for the banks to achieve the 50 percent target, and they may eventually end up provisioning higher taxes. However, if all listed banks were able to lend the additional advances required to reach the 50 percent target, the government would lose around Rs. 157 billion in tax revenue.