Bank Deposits Rise 20% as Lending Slows

Pakistan’s banking sector has recorded a 20.1% year-on-year increase in deposits, reaching Rs36.586 trillion in February, as per data published by the State Bank of Pakistan. On a month-on-month basis, however, deposits registered a marginal decline of 0.2%.

Total bank advances stood at Rs14.534 trillion, reflecting an increase of 4% year-on-year and 1.7% compared to the previous month. Consequently, the advance-to-deposit ratio declined to 39.7%, down from 45.9% recorded during the corresponding period last year, indicating a relatively reduced proportion of lending activity in relation to deposit growth.

Market analysts have attributed the short-term contraction in deposits to seasonal liquidity patterns, particularly increased currency circulation during Ramadan and Eid-ul-Fitr, which typically results in temporary withdrawal of funds from the banking system.

Notwithstanding the monthly decline, deposits are projected to expand within a range of 10% to 15% over the course of the fiscal year.

Bank investments increased by 25.4% year-on-year to Rs39.156 trillion, with a further 0.8% rise on a month-on-month basis. The investment-to-deposit ratio increased to 107%, compared to 102.5% in the preceding year and 106% in January.

Analysts have observed that financial institutions continue to allocate a substantial portion of funds toward government securities, reflecting heightened reliance on sovereign borrowing to meet fiscal requirements. This trend has contributed to a relative constraint on credit availability for the private sector, thereby impacting broader economic activity.