KARACHI: Banks are earning profits, but they failing to mobilise deposits which fell between June and November 2011 and again in January 2012 after a marginal rise in December.
The State Bank reported on Tuesday that bank deposits, which were Rs5.599 trillion in June 2011, fell to Rs5.415 trillion in November.
The deposits again witnessed a big outflow of Rs192 billion in January after they rose to Rs5.874 trillion in December.
Bankers confirmed that efforts to mobilise deposits from private sector proved futile during the first seven months of the current fiscal year.
Banks collectively raised deposits by Rs83 billion during the seven months which is comparatively lesser than Rs463 billion raised during the same period of the previous year.
The inflation-hit economy, with poor growth rate, could hardly spare liquidity with minimum possible depositors which is also reflected from the shrinking number of accounts of small deposit holders, said a senior banker of a large private bank.
The monetary policy document also indicated that the total deposits of the banking sector during the first quarter of FY-12 contracted by Rs62 billion against an increase of Rs352 billion during the same period of previous year.
Bankers said that deposits suddenly rose in December 2011 apparently on account of government deposits as well as retirement of short term debt taken by the corporate sector for working capital.
The Governor, State Bank, said last week that most of borrowing of the privates sector during the first half of the current fiscal year was meant for working capital. It means short-term borrowing which is retired within months.
Banks also noted that massive debt retirement by the public sector enterprises and retirement of commodity operations, debt also helped improve deposits position of the banking sector.
“Raising Rs83 billion deposits in six months is not enough to keep the banks profitable. Banks are reinvesting money into government papers which offers three tenures of 12 months, six months and three months,” said Mohammad Imran, a banking analyst.
He said there was little chance for growth of private sector credit off-take since the government still offers attractive rates while non-performing loans are also rising.
The State Bank said the NPLs were rising putting banks under pressure to remain attached with cautious lending approach.
“The situation is grave for the banking sector compared to last year since the economy was poor and unemployment was high.
The current fiscal seems worse for the banks also,” said Imran.
He said the banks may still earn profit but the size of the profit would be lesser and the profits could be limited to few banks.
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