Pakistan’s commercial banks saw a significant decline in deposits during the first two months of fiscal year 2025-26, with withdrawals exceeding Rs. 1 trillion. Data from the State Bank of Pakistan revealed that Rs. 1.035 trillion was withdrawn in July and August, reducing total deposits to Rs. 34.46 trillion by the end of August, down from a record Rs. 35.49 trillion at the close of June 2025.

This sharp reversal follows the highest-ever deposit levels posted by banks at the end of fiscal year 2025.

Analysts attribute the deposit outflow to two primary factors: a substantial reduction in interest rates and new tax enforcement measures. The central bank slashed its policy rate to 11%, down from last year’s peak of 22%, resulting in lower returns for depositors. In response, many individuals have shifted their funds into alternative investment options such as the stock market, gold, and other higher-yielding assets.

Additionally, the government has intensified efforts to expand the tax base, with the Federal Board of Revenue (FBR) warning of stricter actions, including account freezes for non-filers. This has led depositors to reconsider holding large balances in banks, further contributing to the outflow.