The return on bank deposits in Pakistan declined by 12 basis points in April 2025, falling to 4.90% from 5.01% in March, according to the latest official data. This downward movement continues a broader trend that has seen deposit rates steadily decline over the past year, posing significant concerns for savers in an environment still grappling with elevated inflation levels.
On a year-on-year basis, the weighted average deposit rate offered by the banking sector has dropped sharply by 541 basis points. In April 2024, the rate stood at a comparatively higher 10.31%. This dramatic decrease illustrates the widening gap between the return on deposits and the prevailing cost of living, further eroding the real value of savings across the country.
While deposit rates declined, lending rates moved in the opposite direction. The average lending rate for all scheduled banks rose by 38 basis points in April to reach 12.77%, compared to 12.39% in March 2025. However, compared to the same month last year, the lending rate has declined significantly by 828 basis points from a much higher 21.05%, reflecting a broader easing of the monetary stance since 2024.
This divergence between lending and deposit rates resulted in a notable increase in the banking sector spread, which widened by 49 basis points to reach 787 basis points in April 2025. The spread had stood at 738 basis points a month earlier. A higher spread typically indicates improved margins for banks, but it also highlights the growing disparity between what banks earn and what they pay out to depositors.
Despite the falling deposit rates, the total stock of bank deposits has continued to rise. As of April 2025, total deposits in the banking system grew by 19.10% year-on-year, reaching Rs30.6 trillion. This growth suggests that savers are still parking their money in banks, possibly due to limited alternative investment options or a preference for liquidity and safety.
However, the real deposit rate — adjusted for inflation — stood at a deeply negative -5.36% in April. This represents a monthly decline of 313 basis points and highlights the fact that depositors are effectively losing purchasing power on their savings, even as inflation remains among the highest in Asia. On a positive note, this rate was still 1,141 basis points higher compared to the same month last year, when real deposit returns were even more deeply negative.
The real lending rate — the rate at which banks lend money adjusted for inflation — came in at 0.19% in April. While it marked a substantial decline of 501 basis points from March, it was still 622 basis points higher than in April 2024. This indicates that, in real terms, the cost of borrowing has come down significantly over the past year, providing some relief to borrowers.
These figures highlight the delicate balancing act facing Pakistan’s financial policymakers. While easing lending rates can help stimulate economic activity, the persistent decline in deposit returns, especially in real terms, may deter savings and challenge financial inclusion efforts. As the country navigates inflationary pressures and adjusts its monetary policy, the trends in deposit and lending rates will remain a crucial indicator of economic sentiment and banking sector health.