Bank deposits increased to Rs26.398 trillion in October, up 18 percent from a year earlier, as savers flocked to take advantage of the highest interest rates in Asia, data from the central bank showed.
On a monthly basis, however, deposits in the banking industry increased slightly by 0.3 percent from Rs26.318 trillion in September, according to the State Bank of Pakistan (SBP).
Analysts attributed the increase in deposits to several factors, including higher interest rates that encouraged savers to keep their money in bank accounts, remittance growth from overseas workers, and rapid branch expansion of some banks.
“The deposit growth is also due to the conversion of foreign currencies into rupees and holding them in banks rather than at home following the government’s September crackdown on the illegal currency trade and dollar smuggling,” an analyst said.
“Another reason is that the increase in interest rates encouraged savers to keep their money in bank accounts, as evidenced by the rising average rate of return on deposits.”
Remittance growth also boosted deposits. In October, remittances from Pakistani workers overseas increased to $2.5 billion, up 12 percent from the previous month. Moreover, the rapid branch expansion of some banks contributed to the increase in deposits.
Analysts anticipate that the remarkable growth in deposits will drive banks’ earnings in the coming months even if the interest rates fall.
The country’s government’s need for borrowing, currency devaluation, and inflation forecasts will all continue to affect interest rates. The market had previously predicted that interest rates would stay at 22 percent until the first quarter of 2024.
However, a significant decline in the yields on Pakistan’s Investment Bonds this week, spurred by hopes that inflation would decline sooner than expected, suggests the SBP may be able to lower rates in its upcoming monetary policy review, which is scheduled for next month. Bank advances increased by 8 percent year-on-year to Rs11.898 trillion in October.
