KARACHI: The bank deposits by wholesale trade sharply increased by 240 percent in November 2019 owing to higher interest rate and abolishing withholding tax rate on cash withdrawal, market sources said on Wednesday.
According to data released by State Bank of Pakistan (SBP) on December 17, 2019, the bank deposits by wholesale trade increased to Rs511.45 billion by end of November 2019 as compared with Rs150.24 billion a month ago.
The market sources said that the sharp increase in deposits by wholesale trade was mainly due to prevailing higher interest rate.
The SBP in its monetary policy announcement on November 22, 2019 kept the policy rate unchanged at 13.25 percent.
The sources said that the improvement in economic indicators also helped the confidence building of investors.
This is also evident in the collection of withholding tax by Federal Board of Revenue (FBR) on profit on debt. The collection of tax from bank deposits registered increase by 204 percent to Rs21.6 billion during July – November 2019/2020 as compared with Rs7.1 billion in the corresponding period of the last fiscal year.
The market sources also attributed to rise in bank deposits by wholesale trade to abolishing withholding tax on cash withdrawal by the government.
The withholding tax at 0.3 percent which was applicable on the income tax return filers on withdrawal of cash above Rs50,000 in a day was abolished through Finance Supplementary (Second Amendment) Act, 2019.
The sources said that majority of people making financial transactions had filed their annual returns to avoid paying withholding taxes or avail reduced rate of withholding tax.
The filing of income tax returns has increased to record level of 2.71 million for tax year 2018.
According to the SBP data the bank deposits of retail trade however slightly fell to Rs234.6 billion by end of November 2019 as compared with Rs241.25 billion in October 2019.
The overall deposits under the head of wholesale and retail trade, repair of motor vehicles and motorcycles increased to Rs775.6 billion in November 2019 as compared with Rs419.6 billion in October 2019.