Bank Adavance-to-Deposit Ratio Falls to 38.1% in June 2025

Karachi, July 15, 2025, 04:57 PM PKT — Pakistan’s banking sector has doubled down on caution, with the gross Advance-to-Deposit Ratio (ADR) plunging to 38.1% in June 2025, down from 39.8% in May and 40% last year, per Arif Habib Limited (AHL) data, reflecting a 172 basis point month-on-month and 186 basis point year-on-year drop. This reluctance to extend private credit persists despite emerging loan demand, while the Investment-to-Deposit Ratio (IDR) slipped to 103% from 105.8% monthly, yet surged 608 basis points year-on-year from 96.9%, signaling a heavy tilt toward government securities amid attractive yields, low risk appetite, and macroeconomic uncertainty.

Analysts highlight a two-year trend of preferring government lending over private sector credit, driven by credit risk fears and government borrowing crowding out private borrowers. Deposits soared to Rs35.5 trillion, up 14.1% year-on-year and 8.5% month-on-month, boosting liquidity, while advances hit Rs13.5 trillion, growing 8.7% year-on-year and 3.8% month-on-month, hinting at a slow credit recovery tied to stabilising interest rates. Investments jumped 21.2% year-on-year to Rs36.6 trillion, outpacing deposits and advances, reinforcing low-risk debt focus. With the State Bank of Pakistan’s cautious stance and high fiscal needs, experts predict sustained high IDR unless private sentiment rebounds strongly. Web context notes lending trends, while posts found on X show concern—some question credit access, others blame government reliance. Critically, the narrative of “prudent banking” may mask private sector neglect—web data hints at growth lags, and X sentiment suggests distrust in balanced recovery, pointing to underlying tensions.