In June 2022, the banking sector saw record growth in deposits, advances, and investments, despite an increasingly tough business climate.
The State Bank of Pakistan (SBP) has revealed that deposits held by the banking sector have surged to a new record high of over Rs. 22.8 trillion as of the end of June 2022. This is mainly due to an increase in policy rates, which has also pushed up the deposits rates offered by the banking industry to a double-digit level.
The recent policy rate increase to 15 percent is likely to attract more funds into the banking and financial system, due to the increased profit rates on various products offered by commercial banks and mutual funds. This influx of money will help to stabilize the financial system and ensure long-term prosperity.
The banking system saw a slight increase in advances, reaching an all-time high level of Rs. 10.88 trillion. The consistent appetite for borrowing from banks by the industry is due to the economic recovery of the previous financial year. However, high markup rates might slow down the growth of the advances from July onwards.
Similarly, the investments of the banking and financial sector also surged to a record all-time high of Rs. 17.4 trillion. The investment is mainly in the government’s papers, Sukuk, and privately placed Term Finance Certificates.
The investment may also continue its pace in the months to come. The advance to deposit ratio surged to 47.7 percent and the advance to investment ratio increased to 76.4 percent by end of June 2022.