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Total deposits in the nation’s banks grew by 16.5% over the past year to Rs17.08 trillion in January 2021, as a majority of businesses and households opted to avoid non-essential spending and saved a maximum amount to fight unforeseen challenges during the COVID-19 pandemic.
Bank deposits had stood at Rs14.67 trillion at the end of January 2020, the State Bank of Pakistan (SBP) reported.
“A large number of businesses and households did not make unnecessary expenditures during the uncertain times of Covid-19. They opted to save money and park the savings in banks. This led to a rapid growth in deposits of banks,” Meezan Bank Product Development and Shariah Compliance Senior Executive Vice President Ahmed Ali Siddiqui told The Express Tribune.
Businesses kept their expansion plans on hold and waited for the return of economic stability. Moreover, many non-essential businesses faced closure in the initial months of the pandemic.
Airlines are yet to become fully operational as well. Accordingly, such businesses did not spend more and parked their capital in banks, he said. Deposits have not only grown due to hefty savings, but also due to a huge amount of money printed during the tough times.
Besides, increase in remittances from overseas Pakistanis to around $22-23 billion (equivalent to Rs3.4-3.6 trillion) in the last one year (Jan-Dec 2020) also helped in boosting the bank deposits, it was learnt.
The government disbursed Rs1.2 trillion to small and medium-sized businesses and the needy in March 2020 to fight the pandemic.
Moreover, the central bank injected another Rs1.5 trillion into the system through different schemes to protect businesses, avoid layoffs and save individual borrowers from default on payments. A large part of the financing entered the banking system.
“A pick-up in financial transactions through digital channels over the last one year also helped in keeping a significant amount of deposits in the banking system, meaning transactions took place but the money did not go out of the banking system technically,” Siddiqui said.
The latest deposits worth Rs17.08 trillion were 4.5% less than the all-time high of Rs17.87 trillion recorded in December 2020, according to the central bank.
