Bank deposits hit Rs26.1 trillion in August, up 18pc year-on-year

KARACHI: Bank deposits increased by 18 percent to Rs26.1 trillion in August from Rs22.2 trillion a year earlier, a brokerage house, citing the central bank data showed on Tuesday.

Deposits in the banking sector grew by 2 percent in August over the previous month. In July, the deposits totaled Rs25.7 trillion. Analysts said the average rate of return on deposits increased following the hike in interest rates. Deposits are also increasing along with the expansion of the money supply.

Deposit growth continued its upward trend driven by higher net domestic assets (NDA) of the banking system. The increased government borrowing from banks led to the rise in the growth of the NDA.

Bank’s advances increased by 8 percent to Rs11.8 trillion in August. Banks’ investment rose 21 percent year-on-year to Rs22 trillion in August.

Banks’ investment-to-deposit ratio (IDR) increased to 84.3 percent in August from 82.1 percent a year ago. However, the advance-to-deposit ratio of the banks fell to 45.1 percent in August from 49.3 percent in the same month last year.

Analysts said banks' preference for IDR is a result of the weak demand for private sector lending caused by the difficult macroeconomic conditions brought on by the current tight monetary policy.

Banks invest in T-bills and PIBs because they are better yielding investments in government securities that help them secure their profits. Analysts said the government raises more money than expected at T-bill and PIB auctions since it is primarily dependent on local finance when there are no international inflows.