Bank deposits amount to Rs9.4 trillion, up 11.9pc

Deposits in the banking system amounted to Rs9.4 trillion at the end of 2015, up 11.9% from the beginning of the year. According to the latest data released by the State Bank of Pakistan (SBP), the year-on-year rise in deposits in 2015 was slightly higher than the increase in the preceding calendar year. Analysts say the rise in deposits occurred because of an increase in the currency in circulation last year. "We attribute this to higher broad money (M2) growth in 2015, which clocked up at 11% versus 10% in 2014," said Topline Securities research analyst Umair Naseer. The average growth in M2, which includes currency in circulation as well as total demand and time deposits, has been 13% annually for the last five years.

Many observers expected the deposit base to shrink at the outset of the current fiscal year in July 2015. Their concerns were based on the negative impact of the imposition of a withholding tax on cash withdrawals aimed at increasing the number of income tax return filers.

The government had initially imposed a 0.6% tax on every cash withdrawal of more than Rs50,000 a day by a non-filer of income tax return. The withholding tax is still effective, although its rate has been reduced to 0.3% until the end of the current month.

The breakdown of the total deposits shows personal deposits grew faster than the overall deposit base in 2015. Personal deposits amounted to Rs4.7 trillion at the end of December, up 13.7% from a year ago.

Within the personal deposits, SBP data shows deposits maintained by salaried people grew 18.5% while those of self-employed people rose 10.9% year on year. As for loans extended to the private sector, SBP data for the first 11 months of 2015 shows they amounted to Rs3.4 trillion, up 5.4% from the outstanding position at the end of November 2014. Analysts believe the increase in loans extended to the private sector last year was less than sufficient.