Banking sector pushes advance-to-deposit ratio to 47%

Pakistan’s banking sector has pushed the gross Advance-to-Deposit Ratio (ADR) closer to the target of 50% ahead of the year's end with aggressive lending.

The latest weekly data reveals that the banking sector's gross ADR has risen to 47% as of November 15, up from 39% recorded on September 27.

Banks have forced private sector lending, which has led the borrowing to reach PKR 880 billion.

Since September, gross advances have surged by 19%, reaching PKR 14.4 trillion, while deposits remained stable at PKR 30.7 trillion.

Banks are aggressively lending to push their ADR above 50%, aiming to avoid a hefty tax of up to 16% from the Federal Board of Revenue (FBR) on banks with an ADR below 50%.

Analysts indicate that most banks have already achieved the targeted ADR of over 50%. Several banks have reported in their third-quarter financial results that they expect to meet the required ratio by the end of the year.

Additionally, the State Bank of Pakistan (SBP) announced last Tuesday that the Minimum Profit Rate (MPR) requirement no longer applies to financial institutions, public sector enterprises, and public limited companies.

In response, banks are reversing their previously imposed 5% monthly charges on accounts with deposits exceeding PKR 1 billion, following SBP's relief on the minimum deposit rate.