KARACHI: Local banks’ total advances have grown 15 percent on a year-on-year basis to reach Rs9.3 trillion at the end of September, the State Bank of Pakistan reported on Tuesday.
It is the highest growth witnessed after three years, it said. Growth in advances remained stagnant during the last two years due to the economic slowdown and banks’ reluctance to increase their share in lending.
The private sector credit also grew 15 percent on a year-on-year basis to Rs7.8 trillion as of September 30, 2021. Additional taxation by the government on banks with low ADR [Advance-to-Deposit ratio] may also have led the banks to increase their lending. The ADR ratio of the sector still remains on the lower side at 47 percent in September 2021 against 48 percent in September 2020, the central bank said.
Investments of the sector continued to post strong growth, as they increased 27 percent on a year-on-year basis to reach Rs14.1 trillion as of September 30, 2021. The investment-to-Deposit ratio (IDR) of the sector increased to 71 percent in September 2021 against 66 percent in September 2020.
Provisions against advances went up 14 percent on a year-on-year basis and one percent on a month-on-month basis to Rs658 billion. This is better than the pace at which the advances have grown both on a year-on-year and month-on-month basis, which indicates that the pressure from the non-performing loans remains low.
On the liability side, the deposits of the sector grew 17 percent on a year-on-year basis to Rs19.8 trillion at the end of September, slightly above the last five year’s average growth of 16 percent.
The currency in circulation increased 15 percent on a year-on-year basis during the same period. The currency in circulation as a percentage of M2 clocked in at 29 percent, above the previous five-years average of 27 percent, likely due to low-interest rates and an effort to stay out of the sight of the tax authorities.