Banks’ deposits struggle to keep up with the rising interest rates

April 18, 2019 (MLN): The monthly data released by State Bank of Pakistan  on banking system shows that despite the rising interest rate environment, the growth of schedule banks' deposits are sluggish, as it increased by only 7% from Rs 12.6 trillion in March 2018  to Rs 13.4 trillion in the month of March 2019. While on monthly basis it increased by 5%.

Low deposits growth could hit advances by the banks, as well as their capacity to finance government debt. Total advances by the banks remained stagnant in the month of March 2019 compared to previous month, however, when compared to same period last year, it increased by Rs1.1 trillion or 16%.

Meanwhile, total investment by the scheduled banks however decreased by 16% percent to Rs 5.7 trillion in March 2019 as compared to the investment of Rs 6.8 trillion recorded during March 2018. On monthly basis, it declined by 23%.

Going forward, the slowdown in economic activity this year and attractive rates on saving schemes may have a negative impact on deposits growth in 2019.

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