Karachi, July 16, 2024 – The State Bank of Pakistan (SBP) has reported a significant surge of 13.50% in bank deposits from the private sector during the fiscal year 2023-24, marking a notable increase from the previous year.
According to the SBP’s latest data, private sector bank deposits rose to Rs 6.65 trillion by the end of June 30, 2024, compared to Rs 5.86 trillion recorded a year earlier.
Analysts attribute this substantial growth in private sector deposits primarily to the high interest rate environment maintained by the SBP throughout much of the fiscal year. The central bank had notably kept the benchmark interest rate at 22% for an extended period until June 11, 2024, when it announced a 1.5% reduction, lowering the rate to 20.5%.
“The attractiveness of high interest rates incentivized private sector entities to channel their funds into bank deposits, seeking relatively secure and profitable returns amid challenging economic conditions,” stated financial analysts reviewing the SBP’s data.
The decision to maintain a high interest rate environment was aimed at stabilizing the economy amidst persistent inflationary pressures and external economic challenges. High energy prices and elevated costs of raw materials had created a less favorable business climate, prompting many businesses to reconsider their operational strategies.
According to industry reports, several businesses opted to scale back operations or temporarily cease activities, choosing instead to deposit their capital in banks to benefit from higher yields and shield themselves from market volatilities.
“The prolonged period of high interest rates provided a safe haven for private sector funds, particularly amidst economic uncertainties and escalating costs,” noted economic experts familiar with the banking sector dynamics.
While the surge in private sector deposits reflects a cautious approach by businesses amidst economic headwinds, it also underscores the confidence in the banking sector’s stability and the reliability of returns offered during challenging times.
Looking forward, analysts suggest that the recent reduction in the benchmark interest rate could influence future deposit trends, potentially altering the investment behavior of private sector entities seeking optimal returns amid evolving economic conditions.
The State Bank of Pakistan continues to monitor economic indicators closely, aiming to strike a balance between supporting economic growth and maintaining price stability through prudent monetary policy measures.