Even though a sizeable chunk of bank credits are turning into bad debts owing to the current global economic downturn, bank deposits have mostly been moving northward throughout the outgoing fiscal year 2010-11.
By 31 March FY11, the banks’ non-performing loans (NPLs) were recorded at Rs573.524 billion, exhibiting a surge of 3.8 per cent or Rs21 billion against Rs552 billion of the corresponding period in FY10. According to official figures, total deposits of the scheduled banks had witnessed a robust growth of Rs564.096 billion or 12.11 per cent during first 11 months of this financial year. This growth appears to be in a sharp contrast to the huge cry prevalent in the crises-stricken country over deterioration in most of the micro and macroeconomic indicators.
The State Bank of Pakistan’s (SBP) data show that the banks saw their deposits aggregating to Rs5.22 trillion at the end of May FY11, registering a remarkable upsurge of Rs564.096 billion or 12.11 per cent when compared with Rs4.65 trillion of July FY10. It was only during three months, January, February and March of FY11, when the bank deposits witnessed a sluggish trend and contracted to Rs5.024 trillion, Rs5.050 trillion and Rs5.046 trillion respectively.
In the remaining months – August, September, October, November, December and April – the deposits remained in the green zone respectively at Rs4.605 trillion, Rs4.670 trillion, Rs4.733 trillion, Rs4.791 trillion, Rs5.124 trillion and Rs5.135 trillion. In terms of US dollars, the 11-momnth surge in banks’ deposits amounts to $6.57 billion, when calculated on Monday’s dollar-rupee exchange rate of 85.85. The July-May deposits total at $60.811 billion.
The deposits are said to have been surging mainly on the back of record inflows of worker remittances into the country, a phenomenal rise in exports, the banks campaigns to attract deposits on fixed return and investment in the national saving schemes.
According to SBP figures, during July-May FY11 overseas Pakistanis had remitted $10.096 billion, 25 per cent more than $8.063 billion they sent back home during the corresponding period last year.
Whereas the exports, mainly pushed up by the increased prices of Pakistani cotton and rice in the international commodity market, climbed to $20.526 billion during first 10 months of FY10 against $16.167 billion of the same period in FY10.This substantial growth in exports has jacked up the deposits significantly in the outgoing fiscal year. According to reports, the domestic banks had mopped up billions of rupees through different fixed-term deposits schemes offering lucrative rate of returns. From July-January FY11, the national saving schemes had fetched Rs118.76 billion that had further strengthened deposits.
The reports said that the national saving schemes and the fixed term deposits schemes of the banks were currently the only two secure modes of investments in which people were investing. They claimed that in the prevailing situation people were apparently reluctant to invest in the stock market or real estate schemes. According to reports, the strong growth in deposits had enabled the commercial banks to invest in short and medium term investment bonds, market treasury bills and to provide credit to the private sector. The SBP figures, however, show that risk-averse banks appear to be inclined to invest more and more of their deposits into the risk-free government papers, like Pakistan Investment Bonds, MTBs and Ijara Sukuk on heavily-weighted rate of returns.
The State Bank data reveal that during the period ranging from July 1st to May 28, FY11 the banks’ lending to cash-strapped government stood at an exorbitant amount of Rs489.560 billion. Whereas only Rs102 billion were credited by the banks in the private sector that is considered to be the key to the growth of developing economies like Pakistan.