June 9, 2021 (MLN): The total Deposits held by Commercial Banks have shown a growth of 16% YoY to Rs17.95 trillion, which is the highest growth in the month of May'21 in six years.

 While, on a sequential basis, commercial banks’ deposits inched up by 2% MoM from Rs17.56tn, data issued by the State Bank of Pakistan (SBP) showed.

In the last 19 years, Deposits have grown at a compound average growth rate (CAGR) of 15%.

During the same period, M2 expansion was limited to 13% YoY, as compared to the recent average growth of 17% YoY. Moreover, while Currency in Circulation (CIC) increased to 31%of total M2, YoY pace of increase in CIC also witnessed a decline (9%YoY, compared to recent average growth of ~18% YoY), a report by JS Global cited.

According to the data provided by SBP, Investments continued to witness higher growth, clocking in at 26% YoY to Rs13.06tn, given deposits being deployed into government securities. During the same month, governments borrowing to scheduled banks have grown by 41% YoY to Rs.12.417tn.

As per the report, Higher growth in Investments was also fueled by higher Borrowings by the sector this month, taking total Borrowings up to an all-high of Rs4.5trn (+35%YoY) in May’21.

On a monthly basis, the investments expanded by 5% from Rs12.4tn last month.

Consequently, banks' investment to deposit ratio (IDR) which had already depicted an improvement to 67% in Dec-2020, has now increased to 73% by end of May-2021 compared to 67% in same month last year and 71% in the previous month.

On the other hand, demand for Advances remained muted as it grew by just 5% YoY to Rs8.8tn during the month, as banks remained wary of overall economic conditions due to COVID-19. However, on a sequential basis, it inched up by 2% MoM, indicating a slightly better economic activity during the month.

The advances to deposits ratio (ADR) has dropped to 49% as of May-2021 from 54% in May-2020. While compared to previous month, it remained stable.

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