Banks disbursed Rs 2.2 trillion to the non-government sector, including the private sector and NBFCs, during the first five months of FY25, as they aimed to meet their advance-to-deposit ratio (ADR). The goal set by the government.
Under the 2024-25 budget, banks that fail to raise the daily access rate to 50% by December 31 will face an additional tax of up to 15%. The banks’ daily interest rate reached 38% in June, stimulating large-scale lending activities to meet the target.
The State Bank of Pakistan’s decision to cut interest rates by 700 basis points since June, bringing it down from 22% to 15%, further encouraged lending activities.
According to State Bank of Pakistan (SBP) data, credit to the non-government sector reached 2.207 trillion rupees during the July-November period, compared to a net pension of 142.8 billion rupees in the same period last year.
Non-banking financial institutions were the biggest beneficiaries, receiving 1.142 trillion rupees of credit, compared to a net pension of 55.4 billion rupees during the same period last year. The balance of credits extended to non-banking financial institutions amounted to 441.6 billion rupees at the end of June 2024.
The private sector received 997 billion rupees during this period, and traditional banks contributed 698 billion rupees, compared to a net pension of 48.6 billion rupees in the same period last year.
Islamic banks provided loans worth 324.9 billion rupees, compared to net debt repayments worth 28.3 billion rupees during the same period last year. However, Islamic windows of conventional banks showed net retirement of Rs 25.7 billion during the five months.
Banking experts noted that the significant rise in lending helped banks improve their average deposit rate to 47%, which is close to the 50% target required to avoid additional taxes. Banks achieving a daily deposit rate of 40% to 50% will face a reduced tax rate of up to 6%, while banks below 40% will pay higher tax rates.