KARACHI: Banks recor­ded the 10-year’s highest de­p­osit growth of 22.7 per cent in the calendar year 2021 mai­nly due to higher remittan­ces, export proceeds and a sha­rp depreciation of the rupee.

The latest data issued by the State Bank of Pakistan (SBP) on Friday showed that the deposits of scheduled banks increased by Rs3.887 trillion, or 22.75pc, to Rs20.972tr from January to December 2021.

Data showed the deposits were increased by Rs1,574bn in CY19 and by more than double Rs3,203bn in CY20. During the last 10 years, the lowest increase in deposits was noted in CY15 when it grew by 9.9pc against the preceding year’s 10.2pc. However, the growth in deposits remained 11.2pc in CY18 and 12pc in CY19.

Investments in risk-free govt papers also surge by 23.7pc

The rapidly growing depo­sits allowed banks to invest heavily in the government papers, which also attracted a record sum last year. Bankers said the increase in deposits was due to record high remittances, higher export proceeds and devaluation of the rupee which translated into a higher amount for the foreign currency holders.

During the first three-qua­r­ters of the CY2021, almost all banks showed good profits in their balance sheets refl­ecting the positive impact of record growth of the deposits.

Meanwhile, the banks’ investments in risk-free government papers surged by 23.7pc, more than the growth in the deposits in percentage terms. The details showed that the banks parked Rs2,706bn during CY2021 taking the total stock of the investment to Rs14.123tr.

Banks have been earning most of their profits through investment treasury bills, Pakistan Investment Bonds, etc as the government depends largely on commercial banks to borrow money for budgetary support.

Under IMF conditions, the government has not been borrowing from the SBP since 2018. However, the bank investments posted record growth in CY2020 as it jumped by 38pc, or Rs3,186bn, to Rs11.552tr.

The bank advances also noted a growth of 19.8pc or Rs1,682bn during the year, reflecting the higher economic activities. The SBP said the lending to the housing and construction sector rose by 85pc.

The latest Quarterly Com­p­e­ndium: Statistics of the Banking System for July-Sep­tember 2021 (Q3CY21) reve­aled that the expansion (adv­ances) has been particularly contributed by the dom­estic private sector advances, whi­c­h increased by 3.8pc during Q3CY21 against a contraction of 0.5pc in the correspon­ding period of the last year.

The total assets of the banking sector rose 20.9pc to Rs28.790tr till September 2021 against Rs23.808tr in September 2020.

Published in Dawn, January 8th, 2022