Loan demand surges to 77 in Q2-FY25: SBP

February 20, 2025 (MLN): Current loan demand has surged to 77, up from 61 in Q1-FY25, reflecting a notable increase in borrowing activity, according to the latest Bank Lending Survey (BLS) for Q2-FY25, conducted by the State Bank of Pakistan (SBP).

Meanwhile, expected loan demand has risen to 84, indicating a strong appetite for credit across businesses and consumers.

This trend continues the upward trajectory observed in previous quarters, primarily driven by monetary policy decisions and increased financing needs across various sectors.

Sector-Wise Growth

Loan demand increased across all major sectors.

The corporate sector saw a jump from 69 in Q2-FY24 to 78 in Q2-FY25, indicating growing business expansion.

The SME sector followed a similar pattern, with demand rising from 57 to 77 year-on-year.

Consumer loans experienced the most significant growth, soaring from 46 to 82, suggesting a rise in household borrowing.

Meanwhile, agricultural loans remained relatively stable, increasing marginally from 73 to 74, reflecting sustained demand in rural financing.

Loan Applications

A sharp rise in loan applications was observed, with the current number increasing to 75, up from 59 in Q1-FY25.

However, the expected number of applications declined to 83, down from 89 in the previous quarter.

Borrowing Costs

One of the key trends observed in Q2-FY25 is the decline in borrowing costs.

The index for overall borrowing costs remains in the "Decrease Considerably" zone at 14, though slightly higher than Q1-FY25, allowing businesses and individuals to access cheaper credit.

At the same time, the availability of expected funds has improved significantly, with the index rising from 74 in Q2-FY24 to 76 in Q2-FY25, reflecting enhanced liquidity conditions within the banking sector and further supporting loan disbursements.

However, the current availability of funds has declined from 73 to 69, indicating short-term constraints despite the overall improvement in expected liquidity.

Key Drivers

The increase in loan demand is largely attributed to monetary policy decisions, which played a major role with an index score of 86.5.

Other contributing factors include general economic activity, which stood at 59.1, fixed investment needs at 59.5, and inventories and working capital requirements at 81.1.

On the supply side, fund availability was driven by improved bank liquidity at 67.4, macroeconomic conditions at 62, and increasing competition among banks at 45.6.

The surge in loan demand across all major sectors, coupled with improved liquidity and lower borrowing costs, underscores a positive credit outlook for Q2-FY25.

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