Private sector borrowing rises by 265% to Rs1.9 trillion between Jul-Dec

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

The SBP’s monetary easing, successive rate cuts in the policy rate and deceleration in the Consumer Price Index (CPI) created room for cheaper financing, which spurred private sector borrowing but impacted banks’ income. 

The surge was also driven by banks’ efforts to meet the 50% advance-to-deposit ratio (ADR) limit and avoid a 15% incremental tax on failing to comply.

Conventional banks extended Rs1.112 trillion to the private sector during July-December FY25, a significant rise from Rs230 billion in the same period last year.

Islamic banks also witnessed a substantial increase, lending Rs733 billion compared to Rs236 billion last year. Meanwhile, Islamic branches of conventional banks reported relatively modest growth, advancing Rs61.5 billion against Rs55 billion in the previous year.

The SBP data further highlighted record lending to Non-Bank Financial Institutions (NBFIs), with banks disbursing Rs1.354 trillion during July-December FY25, up from Rs485 billion in the corresponding period last year. 

The total credit to the non-government sector during the first half of FY25 reached Rs3.212 trillion, a significant jump from Rs382 billion in the same period of FY24.