The weighted average return paid by Pakistan’s banking sector on deposits declined by 9 basis points to 3.96% in July 2026, compared with 4.05% recorded in the previous month, according to the latest official data. The decline marks a further reduction in the average return being offered to depositors as compared with the level recorded a year earlier.
On a year on year basis, the weighted average deposit rate fell by 857 basis points from 12.53% recorded in July last year. The sizeable annual decline indicates a substantial reduction in the average return paid by scheduled banks on deposits over the past year. The July figure also remained below the rate recorded in June, when the weighted average return stood at 4.05%.
Meanwhile, the weighted average lending rate of all scheduled banks also declined during July. The lending rate stood at 11.94%, down 9 basis points from the previous month. Compared with the same month of last year, the lending rate was 5 basis points lower.
The simultaneous movement in deposit and lending rates reflects changes in the overall pricing of funds within the banking sector. While depositors received a lower average return during July, the average rate charged on lending facilities also edged down from the previous month.
After adjusting the deposit rate for inflation, the real deposit rate remained in negative territory during July. The real deposit rate stood at minus 3.51%, deteriorating from minus 2.99% recorded in June. The negative real return means that the average return on bank deposits remained below the rate of inflation during the month.
The deterioration in the real deposit rate highlights the gap between nominal returns offered on deposits and the prevailing inflation environment. Although the nominal deposit rate declined only marginally on a monthly basis, the real return moved further into negative territory, reducing the inflation adjusted return available to depositors.
In contrast, the real lending rate showed an improvement during July. The real lending rate eased to 4.47%, compared with 4.99% in the preceding month. This followed the 9 basis point monthly decline in the nominal lending rate to 11.94%.
The latest figures therefore show different movements in inflation adjusted returns for depositors and borrowers. The real deposit rate deteriorated from negative 2.99% to negative 3.51%, while the real lending rate declined from 4.99% to 4.47%.
The annual comparison also highlights the significant change in banking sector deposit returns. The weighted average deposit rate of 3.96% in July was 857 basis points below the 12.53% recorded a year earlier. Meanwhile, the lending rate was only 5 basis points below its level in the corresponding month of the previous year.
The latest official figures provide an indication of the prevailing interest rate environment across Pakistan’s banking sector at the start of FY27. Deposit pricing remained considerably lower than the level recorded a year earlier, while lending rates also registered a modest monthly decline.
Overall, the July data shows that the average return on bank deposits continued to weaken, reaching 3.96% compared with 4.05% in June. At the same time, the average lending rate declined to 11.94%. After accounting for inflation, depositors faced a negative real return of 3.51%, while the real lending rate stood at 4.47%.
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