Karachi, January 16, 2024 – Salaried persons in Pakistan have shown a remarkable inclination towards the banking system, as their deposits experienced a substantial surge of over 20 percent in the year 2023.
According to the latest data released by the State Bank of Pakistan (SBP), the deposits in the accounts of salaried persons reached Rs 3.69 trillion by December 2023, compared to Rs 3.06 trillion in the same month the previous year.
Banking experts attribute this significant uptick to adverse economic conditions and unattractive saving rates in government papers, making the banking system an attractive avenue for investment. The State Bank of Pakistan’s decision to maintain the benchmark interest rate at a record high has further fueled this trend, providing a lucrative environment for depositors.
The driving force behind this unprecedented surge can be traced back to the country’s record-high interest rates. On December 12, 2023, the central bank decided to maintain the benchmark policy rate at an unprecedented 22%, marking the fourth consecutive time it had done so. This move has proven to be a powerful incentive, drawing both individuals and businesses to deposit their capital with commercial banks, eager to capitalize on the attractive interest rates being offered.
The allure of higher interest rates has prompted many businesses to exercise caution in initiating new ventures. Instead, they are choosing to secure their capital in bank deposits, viewing them as a safer and more stable option within the current economic climate. The impact of these elevated interest rates on deposit growth is evident, as individuals and businesses prioritize capital preservation over riskier investment strategies.
The total deposits under the head of personal accounts recorded a notable increase of 20.71 percent, reaching Rs 12.69 trillion by December 2023, compared to Rs 10.51 trillion a year ago. This surge is reflective of the growing confidence that individuals and businesses have placed in the banking sector as a secure repository for their funds.
While the surge in deposits is beneficial for the stability of the banking system, it also highlights the impact of the broader economic conditions on individual and corporate financial strategies. The high-interest rate environment has reshaped investment preferences, leading to a shift towards safer and more conservative financial instruments.
As the economic landscape continues to evolve, the State Bank of Pakistan’s interest rate policies will likely play a pivotal role in shaping the financial behavior of individuals and businesses. The challenge for policymakers will be to strike a balance between maintaining a stable financial environment and encouraging economic growth.
The surge in salaried persons’ bank deposits in 2023 is a testament to the impact of record-high interest rates and the prevailing economic conditions. It reflects a strategic shift in financial preferences towards stability and security, as individuals and businesses seek to navigate the uncertainties of the economic landscape.
