Deposits at banks recorded a growth of 16 percent and advances appreciated by 17 percent in 2003 following sharp improvement in macro economic indictors, influx of remittances from overseas Pakistanis and introduction of credit cards.
Kashif Artani, research analyst at Investcapital Securities, said three key statistics of the banking sector, ie deposit base, total credit, and investments, and have seen substantial growth in last two years thanks to the aftermath of September 2001 events.
The growth momentum continued in calendar year 2003 also. Rising from the already high base (reached in 2002), the levels achieved at the end of 2003 are all time high.
According to the latest data issued by the SBP, deposit base (demand and time liabilities) of scheduled banks has reached Rs 1.87 trillion till December 27, 2003, whopping Rs 259 billion or 16 percent increase in 12 months.
In 2002 deposits (DTL) grew by Rs 253 billion or 19 percent. The customer deposits of banking system, on the other hand, have reached Rs 1.78 trillion till December 27, indicating an increase of Rs 265 billion or 17.4 percent.
Since September 2001, deposits have increased by Rs 547 billion or 41 percent. Crackdown on hundi network, resulting in channelling remittances to the banking means, is the key in increasing banks' deposits.
Rise in economic activity, influenced by liquidity-driven declining interest rates, may also have caused multiplier effect on deposits.
Here, we would like to mention that growth in deposits of the banking system goes hand in hand with money supply growth. In calendar year 2003 (till December 27), money supply growth was 17.5 percent.
Total credit (advances) of the scheduled banks increased by Rs 169 billion or 17 percent in 2003 (till December 2003), to reach Rs 1.17 trillion.
While in 2002, credit increase was only Rs 29 billion.
Lower lending rates, which reached 5.5 percent in November 2003 from 10.3 percent in December 2002 lured investors to bring more and more credit to their balance sheets, as this level of cost of debt was never seen before.
Moreover, in order to search for better returns, banks put extra efforts in consumer financing and increased credit figure may be a result of those efforts.
Artani said that 70 percent of the rise came in last three months of 2003.
Increased requirement of cotton financing has resulted in this rise, in addition to seasonal requirements.
Investments of scheduled banks reached Rs 745 billion, an increase of Rs 120 billion or 19 percent in 2003.
In 2002, when banks were finding it relatively more difficult to park their funds, investments surged by Rs 312 billion or 99 percent.
Rate of return on investments has declined substantially, cut-off on 6-month T-bill reached 1.72 percent in last auction while in 2002's last auction the cut-off was 4.4 percent.
This shows that rise in investment is not preferable. But given the magnitude of surplus liquidity in the system, surge in investments is understandable.
Comments
Comments are closed.