Private sector gets banking loans worth rs880 billion
Pakistani banks have extended a
record Rs880 billion in credit to the private sector from July 1 to November
15, FY25, as they push to meet regulatory Advance-to-Deposit Ratio (ADR)
targets and avoid steep tax penalties.
According to the State Bank of
Pakistan (SBP), this sharp rise contrasts with a net retirement of Rs82.4
billion in the same period last fiscal year. Conventional banks led the charge,
disbursing Rs647 billion, followed by Islamic banks at Rs258 billion. However,
Islamic banking branches within conventional banks reported a Rs25 billion
decline.
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lending to the private sector shows upward trend
The surge in lending is driven by
the government’s requirement for banks to achieve a 50% ADR by December 31,
2024, or face additional tax penalties. To meet this target, banks need to
disburse nearly Rs1.5 trillion more in loans, resulting in aggressive lending
across sectors like agriculture and manufacturing.
While this credit expansion provides
businesses with much-needed financing, analysts warn of potential risks to loan
quality and inflationary pressures due to the rapid disbursement pace.
Earlier this month, some banks
introduced a 5% monthly fee on deposits exceeding Rs1 billion to discourage
large deposits and improve ADR compliance. However, following the SBP's removal
of the Minimum Profit Rate (MPR) requirement on deposits from financial
institutions, public sector enterprises, and public limited companies, banks
have withdrawn this fee.
Source: Profit Pakistan