KARACHI: The bank deposits grew by 17 per cent to Rs19.9 trillion during the last 12 months from January 2021, the State Bank of Pakistan (SBP) reported on Thursday.

Bankers found it very attractive as the increased deposits mean the banks earn more.

The balance sheets of all scheduled banks showed they earned healthy profits during the calendar year 2021. The increased liquidity also supported the private sector which borrowed record money during this period.

However, the higher deposits helped the banks to invest more in the government papers to earn risk-free profits.

The data shows the banks’ investment increased by 26pc to Rs14.4 trillion in January compared to Rs11.4tr in January 2021 as the government relies entirely on banks for domestic borrowing.

Recently, the government changed its strategy and started borrowing more from the non-bank sector like insurance and other corporate sectors. The government is facing liquidity problems due to restrictions from IMF not to borrow from the central bank since 2018.

The advances of the banking system also increased by 17.4pc to Rs9.944tr compared to Rs8.467tr in January 2021, reflecting higher borrowing by the private sector. The government believes the higher private sector borrowing is a reflection of higher economic activities while it has projected to achieve a growth rate of over 5pc in FY22.

The advance-to-deposit ratio slightly edged up to 49.8pc in January compared to 49.6pc in January 2021.

However, the investment-to-deposit ratio went up by 546 basis points to 72.3pc during the period under review from 66.8pc in January 2021.

Banking is one of the best profit-making industries while it achieved sustainable growth in an economy where most of the sectors are vulnerable.

Published in Dawn, February 11th, 2022