Banking Industry

Banking IndustryThe banking industry has expanded itself very rapidly in the urban areas while the rural areas were neglected. It is also a part of corporate social responsibility that branches need to be set up in rural areas, however, this would have serious implications over the profitability of banks who may not be ready to compromise over the shareholders value. It is suggested that the cost of setting up the branches in rural areas be allowed as tax deductible expenditure while the three years losses relating to branches set up in rural areas be allowed at one hundred and thirty five percent.
Further, the seventh schedule has not proved to be separatim legislation as in the case of fourth and fifth schedule and the very purpose remain unresolved. Special provision relating to banking industry in the main enactment like section 28, 29A, 30 and 31 of Income Tax Ordinance, 2001 were not specifically embodied in seventh schedule. Consequently, the certainty is still lacking!
Further, the non-alignment of SBP and FBR policies in relation to irrecoverable debt and issue of forced sale value has seriously affected the banking industry. These issues need to be resolved in consultation with banking industry for future purposes. Further, during this recessionary period the three percent limit prescribed in section 29A in respect of consumer loans requires a revisit.
In furtherance, it is interesting to note that UK revenue authorities have amended its stamp duty act to facilitate the Islamic Banking. It is high time that provincial governments do consult the Islamic Banks to eliminate the excessive collection of stamp duty on shariah compliant financial products as part of the provincial budget exercise.



Article courtesy of Muhammad Ashraf