KARACHI, Feb 9: Banking activity has dropped sharply as up to 40 per cent accounts remain idle reflecting the unfriendly investment environment.

Bankers said the prevailing uncertainty linked with the elections had seriously affected the banking activity. They said 30 to 40 per cent account holders were not using their accounts or withdrawing money to invest in the market.

“In countries like Pakistan uncertainty before elections is not an unusual thing but it has hit the investment-related activities, which slid significantly over the past couple of months,” said a senior banker.

Bankers said that the trade-related banking business was normal but the investment by the private sector had witnessed a slowdown.

“One of the major reasons is the slump in the shares market, which is the centre of activities attracting billions of rupees every day but the uncertainty has marred the charm,” said treasurer of a large privatised bank.

He said thousands of account-holders used their accounts daily when they deal in the capital market, which is now a ‘risky’ place to move around. He said only big players were in the market while the middle-class investors were avoiding investing these days.

Another senior banker of a semi-privatised bank said the real estate was another area where investment had dried up.

“The real estate business has lost attraction as the risk is very high due to uncertainty linked with the elections,” he added.

He said the speculation about the elections outcome had created more uncertainty, especially for the real estate business, which has a tendency of slow movement, whether the prices go up or come down.

The real estate business flourished during the last three years and the banks earned record profits. However, most of the investors got the real benefit when the interest rates slipped below two per cent in 2002.

Bulk of the money went into the real estate sector, especially in land purchasing. When the interest rates went up after a couple of years the land prices shot up and paid huge dividend to the investors.

“The real estate transactions these days are insignificant as the investors find it better to sit with their money instead of investing and taking risk,” said the banker.

He was hopeful that the situation would change soon after elections. Most of the bankers were of the view that the phenomenon was temporary and would see a change after elections.

Analysts said the decline in investment activity would hurt the economy and the real impact would be felt at the end of the current fiscal.

“If the investment activities do not revive just after the elections it would certainly hurt the economy already under stress due to poor agriculture performance and low manufacturing growth,” said Abid Saleem, an analyst of a local brokerage house.