KARACHI: Credit to the private sector has reached Rs 1.4 trillion in the ongoing fiscal year (FY25), marking a significant 815% increase compared to Rs 153 billion during the same period last year, according to State Bank of Pakistan (SBP) data.
This surge, recorded between July 1, 2024, and January 17, 2025, is attributed to banks’ efforts to meet the Advances-to-Deposit Ratio (ADR) requirements and avoid additional tax burdens.
The government’s imposition of an incremental tax of up to 15% on banks failing to maintain a 50% ADR by December 31, 2024, prompted aggressive lending strategies, driving the credit boom. Though the tax was later replaced with an increased income tax rate of 44% under the Income Tax Amendment Ordinance 2024, the impact of regulatory pressures continued to propel private sector lending.
Conventional banks led the lending growth, disbursing Rs 722.642 billion in the first seven months of FY25, compared to a repayment of Rs 3.34 billion during the same period last year. Islamic banks also recorded a significant rise in credit, increasing lending by 403% or Rs 501 billion, reaching Rs 625.55 billion, up from Rs 124.255 billion in FY24.
Islamic banking branches of conventional banks contributed an additional Rs 50.213 billion, compared to Rs 31.886 billion last year. The SBP’s data highlights that the combined efforts of conventional and Islamic banks have significantly boosted credit flows, reflecting banks’ response to tax incentives and monetary easing.
This growth underscores the strong demand for credit among businesses and the role of regulatory measures in driving banking sector performance.
