Banks boost lending to avoid tax

Banks have managed to increase their Advance-to-Deposit Ratio (ADR) to 44 per cent in a bid to avoid the 15pc incremental tax due at the end of 2024, analysts said on Wednesday. The government — keen to extract more revenue from banks that recorded unprecedented profits in 2023, nearly double the previous year — appears to have been thwarted as banks rapidly increase lending to minimise additional tax liabilities. Banks’ lending surged by Rs1.1 trillion in October, marking a record-breaking increase. Traditionally, banks have relied heavily on risk-free investments in government securities. However, to meet the tax requirements introduced in this fiscal year’s budget, banks are shifting their strategies.