Bank deposits register 14-year high growth rate

Government, private sector and household deposits with banks in Pakistan grew 22 per cent – the fastest pace in 14 years – to touch an all-time high of Rs19.8 trillion in fiscal year ended June 30, 2021 in the wake of a turnaround in the national economy, according to a report by The Express Tribune.

Bank deposits had stood at Rs16.2 trillion a year ago on June 30, 2020, according to Topline Research.

Pakistan’s economy grew 4pc in FY21 compared to the negative growth of 0.5pc in the prior fiscal year. The government has set the growth target at 4.8pc for the current fiscal year, which started on July 1.

In addition to remittances, the government’s exorbitant borrowing from commercial banks – to bridge its budget deficit, shift to digital banking from conventional banking and excessive money printing all supported the increase in deposits over the year, the report states.

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Bank investments (risk-free lending to the government) in the sovereign debt securities like Pakistan Investment Bonds (PIBs) and T-Bills soared 29pc to Rs13.7 trillion in FY21.

The investment-to-deposit ratio (IDR) increased from 66pc in June 2020 to 69pc in June 2021, but it was down from 70pc in March 2021.

On the other hand, advances grew 10pc to Rs9 trillion in FY21 as banks remained wary of overall economic conditions due to Covid-19.

Advances-to-deposit ratio (ADR) declined from 51pc in June 2020 and 48pc in March 2021 to 45pc in June 2021.

Currency in circulation (CIC) increased 14pc during the same period. CIC as a percentage of M2 stood at 29pc, above the past five-year average of 27pc, likely due to low interest rates and efforts to stay out of the sight of tax authorities.


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