Banking deposits decline to Rs13.057 trillion by January 2019

Banking deposits decline to Rs13.057 trillion by January 2019

The deposits in Pakistan’s banking system witnessed a decline of 2.22 percent, totaling Rs13.057 trillion by the end of January 2019, as compared to Rs13.35 trillion recorded on December 31, 2018.

Despite this dip, the deposits experienced an 8.8 percent increase in January 2019 when compared with the Rs12 trillion reported in the same month of the previous year, according to data released by the State Bank of Pakistan (SBP) on Monday.

The banking system had reached a record high in deposits at Rs13.35 trillion in December 2018. Analysts suggest that financial institutions strategically aimed to maximize deposits by the end of the calendar year, given that the banking calendar in Pakistan runs from January to December. Traditionally, individuals tend to withdraw their deposits from banks in the first month of every year, leading to a decline in the overall deposit figure.

In contrast to the trend in deposits, the advances of the banking system showed a robust increase of 19.58 percent, reaching Rs7.84 trillion by January 2019. This growth is significant when compared to the loans totaling Rs6.556 trillion reported in the same month a year ago. The surge in advances indicates increased lending activities by the banking sector, reflecting confidence in the economic landscape and demand for credit.

However, the stock of investments in the banking system experienced a sharp decline, falling to Rs5.223 trillion by January 2019. This represents a significant drop from Rs7.637 trillion reported in January 2018, indicating a substantial decrease of 31.6 percent. Banking experts attribute this decline to a change in the pattern of government loans, with the government increasingly relying on the State Bank of Pakistan (SBP) for budget financing.

The shift in government loans suggests a reevaluation of financing strategies, with potential implications for the overall investment portfolio of the banking system. The decline in investments may also be influenced by changes in market conditions and risk appetite.

While the decline in deposits may be a temporary phenomenon associated with the traditional withdrawal patterns at the beginning of the year, the contrasting trends in advances and investments highlight the dynamic nature of Pakistan’s banking sector. As the sector adapts to evolving economic conditions, stakeholders will closely monitor these indicators to gain insights into the overall health and resilience of the country’s financial system.

Banking experts emphasize the need for prudent management strategies to navigate these changes effectively, ensuring a balanced and sustainable approach to deposits, advances, and investments in the evolving economic landscape of Pakistan.