KARACHI, Sept 23: Heavy withdrawal from banks to avoid deduction of Zakat compelled banks to borrow cash from the SBP discount window, while the money rates remained tight throughout the week, bankers said.

How much cash went out of the banking system was not estimated, but the bankers believe it was not less than Rs30-35 billion across the country.

Some bankers said the estimate was conservative as the borrowing from the State Bank by the banks was to the tune of Rs56 billing during the week ending Saturday.

Most of the banks witnessed heavy withdrawal of cash by depositors, but they believe the cash will return after `Zakat deduction day’ would be over. The government deducts Zakat on first Ramazan and the people withdraw heavily before first Ramazan to avoid deduction.

“Though it is a normal practice continued for years, the amounts withdrawn from banks are rising each year,” said Aleem Ahmed, a local bank manager. He is of the view that the people have lost trust in the government and believe that the Zakat money is not utilised properly.

“We used to read stories about corruption regarding the Zakat distribution and this is also not new,” he said.

Hafeez Siddiqui, a businessman who withdrew his money in the form of pay order so that he could avoid Zakat deduction and deposit it in the same account, said: “We have much better utilisation of the Zakat money than the government that failed to even pass on the huge allocations to the earthquake-hit victims.”

A number of people said they would send their Zakat to the quake-hit Kashmiris who were in real need of help.

“The government should stop collecting Zakat. There is not a single example which could prove that life of even a single person was changed through Zakat,” said Mr Hafeez.

It was also observed that some bankers advised their clients and suggested ways to avoid the Zakat deduction. “There is a lot of ways to avoid Zakat and I do suggest our clients to get rid of it. They can use their money much better than the government,” said a local bank official. “Zakat can simply be avoided by submitting an affidavit of non-deduction of Zakat by a depositor to the bank concerned.”

He said total withdrawal before Ramazan could be more than Rs50 billion. His high estimate was based on information he gathered from various braches across the country.

The withdrawal created a liquidity shortage and the banks borrowed about Rs56.77 billion during the week from the State Bank. However, the bankers were of the opinion said the withdrawal money would join the market in the first week of Ramazan and would create a glut.

Analysts said that a sum of Rs50.35 billion was expected to join the market as a result of maturity of treasury bills, while another Rs2.3 billion would come on account of open market operations conducted last week. The maturity will come on September 28.