Billions of dollars in rupees removed from Pakistani Banks to avoid paying ZAKAT

KARACHI: Thousands of accountholders withdrew billions of rupees from their saving accounts during the last few days ahead of the deduction of ‘Zakat’, the fourth pillar of Islam and an obligatory annual money contribution by affluent Muslims (at 2.5 per cent of one’s savings) for the needy people of the society.

A big number of accountholders rushed to their respective banks and ATM kiosks on Monday intending to draw their cash to avoid zakat deduction. The money market came under tremendous pressure in the wake of heavy withdrawals and faced liquidity crunch that forced banks to borrow Rs8.4 billion from discount window of State Bank of Pakistan (SBP) in order to maintain their mandatory cash reserves.

Though exact amount of withdrawal in a single day is yet to be ascertained, banking sources said that the volume of cash taken out by accountholders on Monday and last week of August was in billions.

Numerous accountholders, particularly corporate accountholders, also converted deposits of billions of rupees into Call Deposit Receipts (CDR) or pay orders, which would be deposited again into the original accounts soon after the deduction of Zakat on Tuesday after the Ramazan moon was sighted on Monday.

This year 2.5 percent Zakat is applicable (Nisab of Zakat) on Rs19,625 or above balance of saving accounts of the banks’ customers. The banking sources said that from 2nd Ramazan which is likely to fall on Wednesday most of the people would again deposit money, encashed or converted into Call Deposit Receipts. Bankers said that it would be very difficult to guess the actual amount of money, either withdrawn from bank or converted into CDRs however, they believed that could be in billions and might be around Rs15-20 billion.