KARACHI: Scheduled banks’ investments rose by over Rs5.8 trillion during the first nine months of 2025, reflecting both their continued preference for government securities and the state’s growing financing needs.

According to State Bank of Pakistan (SBP) data, total investments of scheduled banks stood at Rs35.85 trillion by September 2025, up from Rs30tr in January — an increase of 19.3 per cent. The banking sector’s assets reached 52.4 per cent of GDP in FY25, compared to 49.1pc in the preceding fiscal year.

The SBP noted that the sector remained stable across key indicators, though concerns persist over the limited flow of credit to the private sector. Banks continue to rely heavily on government papers for profits, while private lending remains subdued.

Despite the central bank maintaining its policy rate at 11pc in its latest monetary policy announcement, trade and industry groups say borrowing costs remain too high to encourage new investment. Advances by banks fell to Rs13.46tr by September from Rs14.73tr in January — a decline of Rs1.27tr — highlighting reduced private sector credit demand.

Sector profits remain strong as private lending continues to shrink

Corporate investments in government securities have also risen, reaching Rs7.86tr by June 2025, or around 17pc of total holdings. Analysts say the trend indicates risk aversion among companies holding surplus liquidity, with many opting for risk-free returns instead of business expansion.

The government’s interest payments for FY25 totalled about Rs8.89tr, lower than the initially budgeted Rs9.8tr, mainly due to easing interest rates and some fiscal relief.

Meanwhile, banks’ deposits grew by Rs4.19tr during the same nine-month period, reaching Rs35.21tr by September from Rs31tr in January.

Analysts warn that while the banking sector remains profitable and stable, continued reliance on government borrowing could crowd out private investment and slow economic recovery.

Published in Dawn, October 29th, 2025