Banks Witness Rs862Bn Withdrawals Amid Non-Filer Restrictions

Banks Witness Rs862Bn Withdrawals Amid Non-Filer Restrictions

Karachi, January 23, 2025 – Banks in Pakistan experienced a massive withdrawal of Rs 862 billion during December 2024 as the government prepared to impose stringent restrictions on non-filers of income tax returns. This significant outflow highlights the uncertainty and apprehension among account holders in response to impending policy changes.

According to data released by the State Bank of Pakistan (SBP), total deposits held by banks declined by 2.77% during the month, falling from Rs 31.145 trillion in November 2024 to Rs 30.283 trillion by the end of December. This drop reflects heightened financial caution, particularly among individuals and entities that may fall outside the formal tax net.

On December 18, 2024, the government introduced a bill in the National Assembly proposing strict measures targeting individuals with taxable income who remain outside the tax net. Among the key provisions is the proposed addition of Section 114C to the Income Tax Ordinance, 2001, which would empower the Federal Board of Revenue (FBR) to restrict specific transactions for non-filers. These include:

• Booking, purchasing, or registering motor vehicles;

• Registering, recording, or attesting the transfer of immovable properties exceeding FBR-notified values;

• Selling securities, including debt securities and mutual funds, or opening accounts for such transactions; and

• Conducting certain banking operations, such as:

o Opening or maintaining current, savings, or investor portfolio securities accounts, except for Asaan accounts;

o Withdrawing cash exceeding prescribed limits from bank accounts.

This looming crackdown has created a ripple effect across the banking sector. Account holders are also concerned about declining profit rates as the SBP has implemented significant cuts to its benchmark interest rate, reducing it from 22% to 13% in recent months.

Despite the December withdrawals, SBP data revealed that bank deposits registered an 8.78% year-on-year increase compared to Rs 27.84 trillion in December 2023. However, the month’s sharp decline underscores growing economic uncertainty.

Banks now face a challenging environment, balancing the impact of policy changes and shifting depositor behavior. As the FBR prepares to finalize the proposed restrictions, the financial sector’s response will remain a focal point in shaping the broader economic outlook for 2025.