Karachi, July 19, 2024 – Bank deposits in Pakistan have soared to an unprecedented Rs 31.12 trillion, as reported by the State Bank of Pakistan (SBP) on Friday. This marks a significant 22 percent increase from the Rs 25.51 trillion recorded at the end of June 2023.
Financial experts attribute this surge to the SBP’s high interest rate policy over the past year. The central bank maintained the benchmark policy rate at 22 percent, encouraging both citizens and businesses to park their savings and investments in the banking system. However, on June 10, 2024, the SBP reduced the key policy rate by 150 basis points, bringing it down to 20.50 percent.
“The prolonged period of high interest rates made bank deposits an attractive option for savers,” said one financial analyst. “This, coupled with the uncertainty in other investment avenues, drove a substantial increase in bank deposits.”
Despite the impressive growth in deposits, experts warn of potential declines in the coming months. The recent reduction in interest rates and the improvement in economic activities could lead to a shift away from bank deposits as businesses and individuals seek higher returns elsewhere.
Additionally, recent tax measures introduced in the 2024-25 budget could drive more money into the cash economy as people look to avoid higher taxation. Experts caution that these measures might counteract the growth in bank deposits seen over the past year.
The latest data also revealed a 6 percent rise in bank deposits from May to June 2024. Analysts explain that this increase was partly due to the fiscal year-end activities, with banks making concerted efforts to maximize deposits.
“The fiscal year-end always sees a push from banks to boost their deposit base,” noted another expert. “This year was no different, with institutions striving to close the year on a high note.”
The SBP’s decision to cut the policy rate is seen as a strategic move to stimulate economic growth, but its impact on bank deposits will be closely monitored. Financial institutions may need to adopt new strategies to maintain deposit levels amidst changing economic conditions.
In summary, Pakistan’s bank deposits have reached a record Rs 31.12 trillion, driven by high interest rates and strategic fiscal year-end banking activities. However, with the recent interest rate cuts and new tax measures, the sustainability of this growth remains uncertain. The coming months will reveal how these factors shape the future of bank deposits in the country.