Karachi, September 19, 2024 – Bank deposits in Pakistan surged by 18% year-on-year (YoY) in August 2024, according to data released by the State Bank of Pakistan (SBP) on Thursday. Total deposits reached Rs 30.78 trillion by the end of August 2024, up from Rs 26.11 trillion during the same period in 2023.
Experts attribute this significant increase to higher interest rates, which incentivized depositors to park their funds in banks for higher returns. With the interest rates elevated during this period, banking customers seized the opportunity to maximize profits from their deposits.
In its half-yearly performance report for the banking system, the SBP noted a substantial growth in deposits for the first half of the calendar year 2024 (H1CY24). Deposits rose by 11.7% in H1CY24, compared to a 14.2% increase in the same period in 2023. A closer look at the data reveals that savings deposits grew by 14.9% in H1CY24, significantly outpacing the 9.8% growth recorded in the same period of the previous year. However, fixed deposits only saw a modest 1.0% growth compared to 8.5% in H1CY23.
The SBP attributed the slower growth in fixed deposits to banks offering lower rates of return amid expectations of a decline in interest rates during H1CY24. In contrast, savings accounts remained attractive to depositors due to better returns. Additionally, banks introduced various products, such as specialized accounts for old-age citizens and women, which appealed to specific customer segments, further boosting savings deposits.
Current account deposits, which make up 41.3% of total customer deposits, increased by 13.4% in H1CY24, slightly lower than the 16.1% rise recorded in the same period last year.
Despite the YoY surge, bank deposits declined by 1.1% in August 2024 compared to the record-high level of Rs 31.12 trillion at the end of June 2024. The banking sector experienced a withdrawal of approximately Rs 340 billion over July and August 2024.
Experts suggest that changes in the taxation regime, effective from July 1, 2024, may have driven this withdrawal. Furthermore, seasonal factors played a role, as banks worked to increase deposits before the end of June to improve their financial statements for the fiscal year.
This mixed trend of growth and withdrawals reflects the dynamics of Pakistan’s financial system amid changing economic conditions.
