Loan demand rebounds sharply in Q4FY26

August 14, 2026 (MLN): Overall demand for loans has increased considerably on a quarter-on-quarter basis, with the current index climbing to 79 in Q4-FY26 from 72 in the previous quarter, moving back into the Increase Considerably zone, according to the latest Bank Lending Survey (BLS).

The survey, conducted by the State Bank of Pakistan (SBP) during July 1–31, 2026, covered 38 respondent banks, against 44 respondents in the preceding round.

Future loan demand expectations also picked up, rising to 87 from 74 in Q3-FY26.

Among key demand drivers, inventories and working capital requirements rose to 70 from 63 in the previous quarter, while fixed investment needs edged up to 59 from 56.

However, monetary policy decisions eased further to 50 from 57, security conditions weakened to 41 from 50, and general economic activity moderated to 40 from 50, continuing to weigh on sentiment even as overall demand recovered.

Sector-Wise Growth

A sectoral breakdown shows demand improved for most segments on a QoQ basis, with SME as the exception.

Agriculture loan demand rose to 83 from 78 in Q3-FY26, corporate demand climbed to 78 from 67, and consumer demand increased to 85 from 77.

SME demand, however, eased to 70 from 77.

On a YoY basis, all sectors recorded a decline.

Agriculture fell to 83 from 88 in Q4-FY25, corporate demand dropped to 78 from 88, SME demand slid to 70 from 84, and consumer demand eased marginally to 85 from 87.

Loan Applications

The number of loan applications picked up during the quarter, with the current index rising to 80 from 73 in Q3-FY26.

Expected loan applications also increased, moving to 88 from 75 in the prior quarter, pointing to a pickup in near-term credit appetite.

Borrowing Costs

The overall cost of borrowing edged higher, with the current borrowing cost index rising to 59 in Q4-FY26 from 47 in the previous quarter.

Expected borrowing costs, meanwhile, eased to 58 from 72, suggesting banks anticipate some moderation in the pace of tightening in the coming quarters.

Fund Availability

Overall availability of funds strengthened further during Q4-FY26.

The current fund availability index rose to 74 from 68 in Q3-FY26, while expected availability increased to 81 from 73, aided by an improving macroeconomic environment.

Key Drivers

The macroeconomic situation, monetary policy decisions, and general economic activity were key factors influencing fund availability during the quarter.

The volume of deposits witnessed the strongest growth, rising to 81 in Q4-FY26 from 70 in Q3-FY26, while the bank liquidity position improved to 69 from 67.

Conversely, central bank monetary policy decisions eased to 45 from 57, and the macroeconomic situation stood at 39 compared to 38 in the prior quarter.

Competition among banks dropped to 49 from 55, matching government borrowing which also fell to 49 from 55 in Q3-FY26.

Non-performing loans (NPLs) edged down slightly, recording 47 in Q4-FY26 down from 49 in the previous quarter

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