Bank deposits rise by 20pc in October : State Bank

KARACHI: In October, bank deposits rose by 20% year on year, indicating high liquidity in the financial sector and low bank advances.

According to the most recent data published by the State Bank on Thursday, deposits in the banking sector in October crossed Rs16,664 trillion, compared to Rs13,912 tr in the same month of the previous year.

Bankers and analysts said the key reason for the deposit rise was the pandemic of Covid-19, which depressed investment and deposited money in the banks.

Bank deposits have so far risen by 14pc in the first 10 months of the calendar year 2020, which was the strongest in thirteen years.

This year, as they did not travel within the nation or go abroad, the coronavirus pandemic did not encourage people to invest their income. Smaiullah Tariq, Head of Research at Pak-Kuwait Investment, said that there were no Hajj or Umrah trips, nor was there much expenditure on shopping and restaurants.

All the money that might theoretically have been invested was deposited in the banks. Meanwhile, the banks were unable to make developments that raised the amount of deposits, ”Tariq said.

The SBP data backed the statement that the salaried class contributed 14pc to bank expansion, reflecting that investment was not possible because of Covid-19, he said.

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Increasing the availability of money, however, has also helped raise deposits. Money supply during the year witnessed a rise of 17pc, according to the SBP numbers. Monetary expansion in the fiscal year FY20 was Rs3.1tr compared to Rs1.8tr growth reported a year earlier.

Bankers said that economic activity was at the lowest level during the ongoing Covid-19 pandemic, which did not encourage the banks to raise their advances.

“At the same time, because of the greater turmoil on the economic front that resulted from the pandemic, banks were wary about extending loans,” said a banker.

In October, banking assets reported a growth of 38pc on a yearly basis. The ratio of investment to deposit (IDR) increased to 66pc. At the same time, the advance to deposit ratio (ADR) fell on a yearly basis in October from 58pc to 49pc, indicating sluggish economic activity.

The SBP data shows that, instead of borrowing, the private sector withdrew its loans in the first quarter of the fiscal FY21, amounting to Rs96.5bn.

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