State Bank of Pakistan. — File Photo
KARACHI, May 25: Banks failed to mobilise fresh deposits this calendar year due to poor savings trend and higher consumer spending while they made collective advances of just Rs1 billion since December 2012.
A comparison of deposits, advances and investment showed that the banks had gone away from the real job of pumping money into the economy. Rather, they preferred investing in risk-free government papers to remain profitable.
According to the State Bank data the stock of bank advances registered a marginal growth of Rs1bn to Rs3.857 trillion at the end of April 2013 from Rs3.856tr in December 2012.
In the last five years the banks did not make any effort to place their liquidity with the private sector for better returns and accelerate economic activities despite the SBP encouragement.
Rather the banks continued parking their money in government papers despite comparatively low return due to higher inflation. The inflation remained in double digits for most of the time during the last five years.
According to the SBP, the investment of banks in government papers is still increasing despite substantial cut in the return. Since December 2012, the investment of banks was Rs3.888tr which rose to Rs3.892tr in April 2013.
The investment went up to even cross Rs4tr in March but it fell again to Rs3.892tr, showing the banks’ slightly slow investment trend during a month.
However, bankers said investments would continue in government papers unless the economy revives. The poor economic growth has higher potential for default, they said.
Despite their efforts, the total default of the banks is still more than Rs600bn, not supporting the banks’ argument for lower advances.
Banks in Pakistan are safer compared to banks all over the world for many reasons, with loans to government being the topmost one.
The banks have been lending over 80 per cent of their money to the government which protected the banks from shocks felt by the financial sector all over the world.
A senior banker said that low mobilisation of deposits was due to uncertainty in the country which supported the idea to remain liquid.
They said higher inflation also discouraged people who did not keep their money in banks as gold and dollar paid more than the local banks returns on their deposits.
Only last year the investments in the gold paid 12pc return while the dollar paid about 9pc return in Pakistan.