While overall slowdown in M2 growth has been witnessed in 1H2011, increase in demand for money has rendered into higher growth in currency in circulation (CIC) that has restricted deposit growth of commercial banks in the country at 4% during Jan-June 2012 based on June 22 data to reach Rs 6.1 trillion ($65bn).
“This growth is lowest in last few years as average deposit growth stood at 10% in last 5 years,” said Topline analyst Farhan Mahmood. In Pakistan, the analyst said, deposit mobilization generally remained higher in first half of FY12 compared to the second half.
Interestingly, he said, the banks advances after remaining flat since last one year posted a growth of 5 percent to Rs 3.5 trillion ($37bn) during 1H2012.
That said, out of Rs 250 billion additional deposits generated during this period, approx.50% of the funds were parked in advances while the rest were diverted to government securities.
“This is against the trend where banks are aggressive in investing in risk free high yielding government securities,” Farhan said.
