Pakistan banking industry deposits contracted by Rs 22.5 billion in February to stand at Rs 9.38 trillion as against of Rs9.408 trillion of January due to demand of the money in the open market.
According to the State Bank of Pakistan (SBP), the deposits of all banks declined to Rs 9.38 trillion from Rs 9.408 trillion in January 2016 and Rs 8.49 trillion registered in February 2015. Economists said the negative growth in deposits is seasonal because of demand of money but the growth may recover in next month. Investments registered strong growth to reach Rs 7.01 trillion in February 2016 from Rs6.81 trillion in as banks continued to invest in risk-free government securities. The investment number stood at Rs 5.58 trillion in the month of February 2015. There are strong expectations for bullish advances growth owing to strong prospects from the initiation of China-Pakistan Economic Corridor (CPEC), but the number of advances remains flat at Rs 4.83 trillion in February from previous month.
According to Ministry of Water & Power, out of the total $46billion, $28 billion projects are to be completed by 2018, which may involve financing of power and infrastructure projects by Chinese and local banks. This coupled with other planned power sector projects are likely to trigger higher advance growth going ahead.
Banking sector analysts suggested that these projects will generate an additional credit demand of $2 billion annually during the next 3-years, which is equivalent to 5% of the total advances of the industry. Bankers are also of the view that local component of the financing could be 10-20% of the total planned investment during the next 3-years. It can be expected that advances to grow by 10-12% in 2016 and 14% on average during the next three years in 2016-18. Initially there were concerns that whether the planned Chinese investment would materialize but the financial close of few projects have already been achieved indicating strong potential for China-Pakistan Economic Corridor related funding.