Bank deposits surge 9.1 percent, highest since CY2007
ISLAMABAD: The bank deposits surged by 9.1 percent during the first half (H1) of Calendar Year 2020 (CY20) compared to increase of 6.8 percent during the same period of CY2019.
According to Mid-Year Performance Review of the Banking Sector (January-June 2020), it was the highest acceleration since H1CY07.
“The compositional analysis indicates that Savings and Current Account (Non-Remunerative) deposits together explain 90 percent rise in total deposits during H1CY20,” it added.
Citing reasons behind the acceleration in deposits, the report said that owing to the COVID-19 pandemic and the associated lockdown, economic activity slackened, which resulted in deposits accumulation.
For instance, imports during Q2CY20 amounted to $9.5 billion as compared to $12.6 billion in Q2CY19, it said. In addition, due to constraints on spending avenues (for example closures of restaurants, shopping malls etc.), “forced savings” drove up deposits.
COVID-19 also drove-up the deposits via economic uncertainty channel. People did not utilize their savings to ward against uncertain income flows during the pandemic.
The SBP, in perspective of COVID-19, instructed the banks to waive off all charges on funds transfer through online banking channels, it said adding such incentives could have helped contain cash transactions and pushed-up the deposits.
Strong inflow of Workers' Remittances could be another reason behind the rise in deposits. Besides, these remittances might not have been fully utilized for consumption due to the lockdown, it added.
Other investment avenues were limited in the pandemic because of which people preferred to keep their savings in the banks.
Banks efforts to mobilize higher funds also contributed to the increase in deposits.
According to the report, it was common practice in the industry to set deposit targets for June and December. - APP