The banking industry continued to attract deposits against the highest-ever profit rate of over 20 percent. For the first time, the total deposits surpassed the remarkable figure of Rs. 25 trillion.
According to the statistics updated by the State Bank of Pakistan (SBP), the deposits of the banking industry surged to Rs. 25.50 trillion by the end of June of the current year as against Rs. 24.38 trillion reported by the end of May 2023, showing an increase of 5 percent or Rs. 1.1 trillion on a month-to-month basis.
The deposits of the banking sector usually witnessed outflow ahead of Eid-ul Azha as the seasonal investors capitalized their savings to earn short-term profit. This year, the deposits growth sustained as banks offer risk-free high-profit rates to their depositors on saving accounts and term deposit certificates.
Banks offered a minimum deposit rate of 20.5 percent to their customers excluding tax and duties following the high policy rate jacked up by the banking regulator.
Many commercial banks offer minimum deposit/ profit rates to their depositors, on the other hand, a few of the banks mainly microfinance banks offered profit rates by up to 24 percent on their savings products
Similarly, the high-profit rates offered by the Government on securities also attracted banks to invest in its bonds and papers, which ultimately pushed up the investment of the banking sector to an all-time high level of Rs. 20.8 trillion by the end of June 2023 as compared to Rs. 20.1 trillion reported by the end May 2023., showing an increase of 4 percent from the last month.
The cash-strapped government has been borrowing heavily from commercial banks through its securities of various holding periods at an average profit rate of 22 percent.
The advance-to-deposit ratio has dropped to 47.8 percent and the Investment-to-deposit ratio stood at 81.9 percent.
The advances of the banking sector, on the other hand, recorded a lesser growth than these two above indicators reflecting the increasing trends of saving of banks’ customers and investments of commercial banks.
The advances of the commercial banks also surged to an all-time high level at Rs. 12.2 trillion by the end of June 2023 as compared to Rs. 12.07 trillion reported by the end of May 2023, showing a meagre 1 percent increase on a month-to-month basis. Meanwhile, the interest rates on advances are higher than the policy rate of Rs. 22 percent.
Source: Pro Pakistani