The banking industry in Pakistan has reported record-high deposits of Rs. 26.1 trillion as of the end of August 2023.
According to data from the State Bank of Pakistan (SBP), deposits in the banking sector increased by Rs. 3.95 trillion or 18 percent compared to the same period last year when they stood at Rs. 22.15 trillion. From July 2023 to August 2023, bank deposits increased by approximately Rs. 408 billion or 1.6 percent.
In August, bank advances grew by 8 percent to reach Rs. 11.8 trillion, while investments increased by 21 percent to reach Rs. 22 trillion. The investment-to-deposit ratio (IDR) for banks increased to 84.3 percent in August, up from 82.1 percent the previous year. However, the advance-to-deposit ratio for banks decreased to 45.1 percent during the same period.
Banks’ preference for a higher IDR is attributed to the low demand for private sector financing amid challenging macroeconomic conditions influenced by the central bank’s tight monetary policy. It is expected that the State Bank of Pakistan will raise the policy rate by at least 200 basis points to 24 percent following the recent auction of Treasury Bills, which saw the government raising domestic debt at high interest rates of up to 25.06 percent. The Monetary Policy Committee is scheduled to meet on September 14, 2023, to decide on any interest rate increases.