KARACHI: At the end of the third quarter of the current financial year, conventional banks have yet to start lending to the private sector; instead, the State Bank’s data shows a net debt retirement of Rs32.8 billion.

However, the banks used their Islamic branches for Shariah-compliant lending and it was at a three-year high. The central bank’s latest data shows that conventional banks did not consider lending to the private sector since it posted a net debt retirement of Rs32.8bn during the July-March period of FY26.

It is strange that banks are avoiding interest-based lending, but getting interest from the government by investing over 80 per cent of their liquidity in government bonds.

The data shows that during the entire FY25, lending by conventional banks stood at Rs405.7bn, compared to Rs211bn in FY24.The trend indicates that interest-based lending to the privates sector has fallen drastically.

However, lending by conventional banks through their Islamic banking branches were at a record high during the first nine months of the current financial year.

Lending through Islamic branches reached Rs657bn, compared to Rs115.8bn during the same period of the previous fiscal year. Lending through this source was recorded at Rs157.8bn in FY25 and Rs55.5bn in FY24. Islamic banks’ lending to the private sector remained much below that by conventional banks.

Published in Dawn, March 31st, 2026