The multivalent Raast Programme- Pakistan banking sector making progress.

Byline: S. Kamal Hayder Kazmi

The State Bank of Pakistan (SBP) has greatly contributed for the development of the economy of Pakistan by playing vital role in the management of financial systems of Pakistan.

Experts identified that banking sector has been in the driving seat in present era. It is posting well growth in profits on the strength of its deposit profile that favours consumerism instead of savings. Statistics showed that the banking sector spread for the month of January 2022 grew by 18 basis points (bps) over the month which brings its latest value to 4.26 percent as against to the prior month's spread of 4.08 percent. However, compared to the corresponding month last year, the spread has reduced by 11bps as it reached at 4.37 percent in January 2021.

As per data, the lending rate for all banks jumped by 65bps MoM and 139bps YoY to stand at 9.34 percent. Meanwhile, the deposit rate clocked in at 5.08 percent, enhanced by 47bps over the month and 150bps over the year in January 2022. In addition, fresh lending rates reached at 10.78 percent during the month under review, up by 111bps MoM and 294bps YoY, while fresh deposit rates grew by 55bps MoM and 328bps to 6.34 percent. Thus, statistics showed that fresh banking spread during January 2022 reached at 4.44 percent, depicting a growth of 56bps MoM. While compared to the same month last year, it fell by 34bps.

In Pakistan sources registered that banking spread is much higher than banks in India, because Indians are willing to tie up their savings for some period, while Pakistanis prefer immediate encashment of their deposits. The saving rates in our country are lower due to higher consumptive deposits. Indian long-term deposits facilitate their banks to finance long-term industrial projects. The long-term projects are financed in Pakistan through foreign loans while deposit profile of Indian reveals that hardly 30 percent of their deposits are in current or normal saving accounts.

Banking in Pakistan is different from banking in other countries where banks come up with products to attract long-term deposits. Long-term deposits are a sign of stability in the banking system. The service charges of the banks have also increased abnormally. For years banks were providing ATM receipt to depositors free of charge. Now they are charging Rs2.5 whenever the customer demands a receipt. The ATM charges if a transaction is conducted from another bank have been increased from Rs15 to Rs17.

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