Pakistan’s bank deposits experience 18% surge
Bank deposits in Pakistan experienced an 18% surge in
October, reaching Rs26.398 trillion, compared to the previous year. This
increase, attributed to the country's appealing interest rates, contributed to
a slight 0.3% rise from September, maintaining a high deposit level.
Multiple factors contributed to this upswing. The allure of
higher interest rates encouraged individuals to deposit their money in banks,
and increased remittances from overseas workers further fueled the growth. The
crackdown on illegal currency trade and dollar smuggling also prompted more
people to convert and deposit foreign currencies. Additionally, the expansion
of specific bank branches played a role in supporting the rise in deposits.
Pakistan's
salaried class boosts bank deposits to Rs3.45 trillion
The anticipated positive impact on future bank earnings
remains, even with potential decreases in interest rates. The State Bank of
Pakistan may consider rate adjustments in the upcoming monetary policy review,
influenced by government borrowing needs, currency value fluctuations, and
inflation predictions. Although it was initially expected that interest rates
would remain at 22% until early 2024, a recent decline in Pakistan's Investment
Bonds yields may prompt a reconsideration.
In October, bank advances increased by 8%, reaching Rs11.898
trillion, and bank investments surged by 27% to Rs23.232 trillion. While banks
are benefiting from attractive returns on government securities, their lending
activities are primarily driven by the government's growing borrowing
requirements.
Pakistan's
deposit protection scheme aligns with global standards: SBP
To prevent a liquidity shortage in the market, the State
Bank of Pakistan injected a substantial amount, Rs4.65 trillion, into banks
through a 28-day open market operation. Meanwhile, the growth of broad money
slowed to 12.9% by the end of September, attributed to reduced private sector
credit and diminished financing in commodity operations. A similar decline was
observed in the growth of reserve money, primarily due to a slowdown in
currency circulation.
The positive shift in the composition of both broad money
(M2) and reserve money was influenced by the expansion of Net Foreign Assets
(NFA) of the State Bank of Pakistan and the banking system, driven by
significant foreign exchange inflows in July. Concurrently, Net Domestic Assets
(NDA) decreased.
Source: https://www.incpak.com/