KARACHI, December 09 2024: In response to ongoing concerns within the banking sector, the Prime Minister has established a committee tasked with resolving issues related to the Advance to Deposit Ratio (ADR). The committee’s goal is to ensure the effective management of ADR through a review of fiscal and regulatory measures, which will help stabilize the sector and promote balanced growth.
Key Responsibilities of the Committee
The newly formed committee has been given a broad mandate to tackle the ADR issue and enhance the efficiency of the banking sector. As per the committee’s Terms of Reference (ToRs), the following key areas will be prioritized:
- Review of Legal and Fiscal Framework:
The committee will assess the current legal framework that governs fiscal measures related to ADR. This review will identify areas for improvement and ensure that banking practices align with economic stability objectives. - Exploring Alternative Fiscal Schemes:
A central aspect of the committee’s work will be to explore new fiscal schemes that can tax the profits earned by banks from investments in government securities. The aim is to find more efficient ways of taxing these profits to benefit the economy without negatively impacting banking operations. - Engaging with the Banking Sector:
In its efforts to find a balanced approach, the committee will engage with key stakeholders in the banking sector. This engagement will focus on building a consensus on potential solutions to address the ADR issue, ensuring that the measures implemented are practical and mutually beneficial. - Recommendations for Optimizing Government Revenues:
The committee is tasked with firming up its recommendations by December 31, 2024. These recommendations will aim to optimize government revenues, while balancing fiscal measures and regulatory considerations in the context of ADR management. - Non-Fiscal Measures for Boosting Private Sector Advances:
In addition to fiscal measures, the committee will explore non-fiscal regulatory steps that can help increase advances to the private sector, thereby stimulating economic growth and supporting businesses. - Potential Legal Amendments:
If the committee identifies the need for legal amendments to implement its recommendations, it will propose the necessary regulatory changes to ensure the smooth operation of its proposed solutions.
Looking Ahead
The formation of this committee marks a significant step towards addressing the ADR challenges currently faced by the banking sector. By working with both fiscal and regulatory measures, the committee aims to create a framework that will not only resolve current issues but also promote sustainable growth and financial stability in the long run.
With a clear deadline of December 31, 2024, the committee’s recommendations will be pivotal in shaping the future of Pakistan’s banking and financial landscape.
