Private Sector Borrowing Soars to Rs1.9 Trillion in First Half of FY25

The private sector borrowed an unprecedented Rs1.9 trillion from banks during the first half of FY25, marking a staggering 265% increase compared to Rs521 billion in the same period last fiscal year, according to data released by the State Bank of Pakistan (SBP).

This sharp rise was attributed to the SBP’s monetary easing measures, including successive policy rate cuts and a slowdown in the Consumer Price Index (CPI). These factors created opportunities for cheaper financing, driving private sector borrowing but exerting pressure on banks’ profitability.

Another key factor was banks’ efforts to comply with the 50% advance-to-deposit ratio (ADR) requirement and avoid a 15% incremental tax for non-compliance.

Conventional banks loaned Rs1.112 trillion to the private sector from July to December FY25, up from Rs230 billion in the same period last year. Islamic banks also saw a significant uptick, extending Rs733 billion compared to Rs236 billion last year. Meanwhile, Islamic branches of conventional banks registered modest growth, advancing Rs61.5 billion versus Rs55 billion previously.

The data also revealed record lending to Non-Bank Financial Institutions (NBFIs), with banks disbursing Rs1.354 trillion in July-December FY25, a significant rise from Rs485 billion in the corresponding period last year. Total credit to the non-government sector surged to Rs3.212 trillion, a dramatic increase from Rs382 billion in FY24