Private sector borrowing increases 65pc in December

Private sector borrowing from banks went up by over 65 per cent in December 2020, latest data issued by the State Bank (SBP) shows.

According to a report by Dawn, the private sector borrowed Rs215.5 billion from banks since July to Jan 8, 2020-21 compared to Rs130.2bn in the same period last year amid accelerated economic activities. The rebound in December borrowings emerged as the turning point against the sharp decline — by 88pc — witnessed in the previous five months of the current fiscal year compared to the same period in FY20.

The available data does not show which sectors were buying higher money from the banks, but most of the it went for working capital.

One of the reasons for higher borrowing by the private sector was the drastic cut in interest rate while banks also received record growth in their deposits. Banking sector deposits increased by 20pc, jumping from Rs13.912 trillion to reach Rs16.664 trillion in October 2020 on a YoY basis reflecting high liquidity in the banking system, and forcing banks to utilise the liquidity resulting into huge investment in government papers and enhanced advances to private sector.

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The banks’ deposits in the first 10 months of the calendar year 2020 have so far grown by 14pc — the highest in thirteen years.

According to SBP’s data, both conventional and Islamic banks increased lending to the private sector.

However, Islamic banks’ lending to private sector increased tremendously during the last six months of the current fiscal as it reached Rs62.3bn against Rs11.7bn in the same period of the last fiscal.

The private sector credit off-take from conventional banks increased to Rs98.2bn against Rs56.5bn in the same period of last year.

The report also quoted a senior banker who said, “At least three sectors including housing and construction, auto sector and exports have shown much better growth than previous year and they borrowed from banks”.

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