Deposits in Pakistan’s banking sector surged by 19.1% year-on-year in September 2024, reaching Rs31.3 trillion, according to the latest central bank data. This growth comes as high interest rates and ongoing efforts by the State Bank of Pakistan (SBP) to promote financial inclusion and digital payment systems boost deposit inflows.
However, deposits saw a slight month-on-month decline of 1.8%, attributed to the recent 450 basis points cut in policy rates since June 2024. According to the SBP Governor’s Annual Report for FY24, the currency-to-deposit ratio fell as more deposits flowed into banks. The report highlights how banks have channeled these deposits into government securities due to low demand for private sector credit.
Private sector credit increased by 4% in FY24, compared to 2.3% in FY23, showing a modest recovery in economic activity. Despite this, the advance-to-deposit ratio (ADR) dropped to 39.3% in September 2024, from 45.1% a year ago, with banks showing a strong preference for risk-free government securities.
The government has set a deadline for banks to achieve a 50% ADR by December 2024, warning of additional taxes if they fail to meet the target. Investments by banks rose 35.7% year-on-year to Rs30.7 trillion, but faced a minor 1.1% drop on a monthly basis.
