Karachi, April 24, 2025 – The State Bank of Pakistan (SBP) has released its flagship annual publication, the Financial Stability Review (FSR) for the calendar year 2024, offering a comprehensive evaluation of Pakistan’s financial sector.
As mandated by Section 39(3) of the SBP Act, 1956, this review encapsulates the performance and resilience of key financial segments including banks, microfinance banks (MFBs), non-bank financial institutions (NBFIs), development finance institutions (DFIs), financial markets, insurance, and financial market infrastructures (FMIs). The report also evaluates the financial health of the non-financial corporate sector, which relies heavily on bank credit.
In 2024, the macroeconomic environment showed notable improvement—marked by reduced inflation, currency stability, and increased economic activity—which in turn enhanced financial stability. The financial sector grew by 17.8%, with banks showing strong balance sheet growth of 15.8%. This growth was attributed to investments and a significant rebound in private sector lending, driven by policy support and improved economic conditions.
Despite earlier tightening, the easing of monetary policy and tax-driven incentives on government securities helped reinvigorate credit flows. However, the shift in policy also led to slower deposit mobilization, pushing banks to rely more on borrowing. Still, the banking sector maintained solid stability indicators. The non-performing loans (NPL) ratio declined to 6.3%, and provisioning coverage surpassed the outstanding NPLs—minimizing net credit risk. The capital adequacy ratio improved to 20.6%, remaining well above the SBP’s minimum requirement, underscoring sectoral resilience.
SBP’s focus on promoting Islamic banking also yielded results, with significant growth in Shariah-compliant assets and infrastructure. Islamic banks maintained their stability, although microfinance banks continued to face financial stress.
The performance of NBFIs and the insurance sector was more mixed, with DFIs experiencing balance sheet contraction, while NBFIs expanded significantly. Meanwhile, the FMIs remained a key pillar of financial stability, supporting the digital transformation of retail transactions. Notably, SBP advanced its cross-border payments agenda by signing an MoU with the Arab Monetary Fund to integrate Raast with Buna.
As the SBP continues to pursue regulatory reforms, it remains committed to ensuring long-term financial system stability. Stress testing confirms that Pakistan’s banking sector is capable of withstanding adverse economic shocks, reaffirming SBP’s critical role in sustaining financial and macroeconomic stability.