In a bid to meet the Advance-to-Deposit Ratio (ADR) targets set by the banking regulator and avoid penalties, banks in Pakistan have significantly increased lending, resulting in a sharp rise of Rs. 1.47 trillion in advances during October 2024.

According to data released by the State Bank of Pakistan (SBP), the banking sector’s total advances reached Rs. 13.77 trillion by the end of October, compared to Rs. 12.30 trillion in September 2024, reflecting an 11% month-on-month (MoM) increase. This aggressive lending also improved the sector’s ADR to 44.2%, up from 39% in the previous month.

Advances and Deposits Performance
In September 2024, advances had already grown by Rs. 497 billion, rising from Rs. 11.80 trillion in August to Rs. 12.30 trillion. However, in October, the banking sector’s deposits saw a slight decline, falling to Rs. 31.11 trillion from Rs. 31.34 trillion in September.

The decline in deposits has been attributed to banks discouraging deposit growth, coupled with lower savings rates, which have made deposits less attractive to customers.

Investment Trends
The banking sector’s investments also saw a significant reduction in October, dropping by Rs. 1.7 trillion or 5.7% compared to the previous month. Total investments stood at Rs. 28.9 trillion in October, down from Rs. 30.6 trillion in September. Consequently, the Investment-to-Deposit Ratio (IDR) fell to 93% in October, compared to 97% in September.