LAHORE: The imposition of 0.3 per cent withholding tax has caused 10 to 15 per cent decline in banking transactions since the implementation of government’s decision.
However, banking sector deposits witnessed 10 per cent growth to reach Rs9.1 trillion in the first six months of the current calendar year 2015 compared to last five years’ average annual growth of 8 percent. The 10 per cent growth was also registered on annual basis in June 2015 against 8 percent growth of the same period last year. Meanwhile, the deposits of private businesses declined by over 5 per cent on monthly basis in the very next month of July.
According to the latest figures released by the State Bank of Pakistan (SBP), deposits of private businesses stood at around Rs2.3 trillion at the end of July, showing a drop of Rs132 billion in banking system in the first month of 2015-16.
The impact of increased taxation is also evident from Profit before tax (PBT) numbers which grew by 39% YoY to Rs88bn in second quarter of 2015. Despite a sharp increase in provisioning expense (up by 4.1x YoY to Rs10.1bn), strong growth in Net Interest Income (NII) and capital gains supported PBT of banks in 2Q2015.
Banks continued to realize higher capital gains in 2Q2015 largely on PIBs taking benefit of declining interest rates. Capital gains during the quarter surged to Rs21.6b as against Rs8.8b in 2Q2014.
