Staff Reporter Karachi
Pakistani banks have appeared to be one of the leading beneficiaries of Covid-19, as they have not only made higher safe lending to the cash-strapped government to help bridge its budget deficit but the lending has helped the banks grow their deposits as well.
The latest numbers suggest that the government remained the single largest borrower from commercial banks and depositor as well during the pandemic.
Accordingly, the ratio of investment (lending to the government) to deposits has soared sharply.
At the same time, banks’ lending to the private sector has slightly improved with a partial revival in economic activities in the country.
However, the growth in lending to the private sector remained so slow compared to the ones in deposits and investment in government papers (lending to the government).
The situation has resulted in a significant drop in the ratio of advances (lending to the private sector) to deposits.
The bank deposits grew 17% in one year to Rs17.25 trillion in February compared to Rs14.81 trillion in the same month of last year, Pakistan’s central bank reported on Friday.
Banks’ investment in government debt securities soared 33% in one year to Rs11.61 trillion in the month under review compared to Rs8.72 trillion in the corresponding month of the previous year.
The advances (lending to the private sector; like industries) enhanced just around 4% to Rs8.53 trillion in the month compared to Rs8.21 trillion in February 2020.
“The deposits have partly grown due to government borrowing,” Topline Securities Executive Director Syed Atif Zafar said while talking to The Express Tribune.
The government has raised Rs1.5 trillion in the latest auction of its security papers against maturing ones worth around Rs900 billion.
The net increase of Rs600 billion in domestic debt is seen as a requirement of the government for financing which stands high compared to a collection of revenue in taxes. “The deposits also grew partly due to slowdown in economic activities.
Many corporates kept their cash parked in bank accounts instead of investing in new projects during the risky times of the pandemic,” Zafar said.