KARACHI, Jan 19: Despite poor economic growth and low manufacturing and trading sector performance, banks succeeded to raise record deposits during the calendar year 2012.

The State Bank report over scheduled banks’ deposits showed banks added one trillion rupees in their stocks which was highest since 2008.

Although small banks remained in trouble to raise deposits to earn more and meet the minimum capital requirement set by the State Bank, it was not the case for larger banks.

Small and medium sized banks are still struggling to improve their deposit base.

Bankers said the large banks have an edge over small banks owing to their credibility with their large branch network which enables them to muster most of profits and deposits.

The stock of deposits of scheduled banks in January 2012 was Rs5.682 trillion which shot up to Rs6.682 trillion.

Bankers said rising remittances from overseas Pakistanis helped build this amount of deposits.

They believe that local constituent in the large deposit would be less than remittances since high inflation and low income, with increasing joblessness, does not allow common man to save or improve their savings in banks.

Workers remittances, while protecting the country from current account deficit, provide liquidity to local market.

The remittance noted a growth of more than 100 per cent during the five years.

But how banks have been using deposits for their profit, instead of supporting the economy for growth, was visible from regular fall in advance-to-deposits ratio.

During this period, banks have dumped most of liquidity into government papers.

The latest State Bank report showed that during the year, Jan-Dec 12, banks invested Rs842 billion leaving little money out of fresh deposits to make advances to the private sector.

In 2011, banks invested Rs846 billion that was record high during the five years.

The massive investment indebted the government heavily, whiles it also made the liquidity unproductive.

At the end of the last fiscal year in June 30, total investment of scheduled banks into government papers was Rs2.360 trillion.

The banks’ advancement showed a better trend during the 2012, particularly while comparing it with the performance of 2011.

Banks’ advances during the entire year 2012 were Rs364 billion much higher, indeed a new beginning.

In 2011, total advances at the end of the year noted were only Rs6 billion.

However, banks still make advances mostly for the working capital and negligible amount related to housing or other sectors. Advances for project financing are almost zero.

Many analysts believe that banks would soon be in trouble since return on government papers has sharply declined and banks are not yet prepared to park their huge liquidity into profitable projects.

Pakistani banks almost remained untouched by the financial crisis that hit many strong global banks and created banking crisis in US and Europe, failing hundreds of banks across the globe.