July 8, 2020 (MLN): In the month of June 2020, the total deposits held by commercial banks have increased to Rs 16.22 trillion, depicting a growth of 12% YoY and 5% MoM. The same is up by 11% YTD.
According to the report by Aba Ali Habib securities, the growth in deposits, despite rate cut, mainly reflects strong savings sentiments during smart lockdown. Going forward, uncertain employment outlook may keep deposits growth in check.
In 2QCY20, the deposits have increased by higher-than-largely-expected 7%, as Net Domestic Assets (NDA) of the Banking System increased by 6% during this period, on the back of 11% increase in Government Borrowings for Budgetary Support, another report by Topline Securities stated.
According to the latest SBP data, total investment by commercial banks during the month under review surged by 40% YoY and 3% MoM to Rs 10.68 trillion, whereas, from year to date it augmented by 21%. Consequently, investment to deposits ratio increased to 66% in June’20 from 53% in June’19 and 67% in May’20.
On the other hand, total advances of commercial banks grew by 1% YoY while on sequential basis, it depicted a decline of 2% to Rs 8.2 trillion despite the aggressive cuts in interest rates by the SBP since Mar-2020. This is due to the impact of the pandemic COVID-19, which has caused the overall slowdown in the economic activity, the report highlighted.
As a result of this, banks' advances to deposit ratio dropped to 51% in Jun’20 from 56% in Jun’19 and 54% in May’20.
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