The Advance-to-Deposit Ratio (ADR) of Pakistan’s banking sector rose to approximately 38% by November 2025, supported by a significant Rs1.5 trillion expansion in private sector credit during the current fiscal year. The increase reflects improved deployment of liquidity as economic conditions gradually recover.
In a recent statement, the Pakistan Banks Association (PBA) clarified that media reports citing an ADR of 35% were based on outdated June 2025 data and do not accurately represent the current state of the sector. Lending activity has steadily picked up since the beginning of FY26, contributing to the upward revision of the ratio by November.
The PBA highlighted that comparisons with regional peers such as India and Bangladesh need to account for structural differences. Pakistan relies heavily on commercial banks for fiscal financing, covering nearly 99.8% of its fiscal deficit. This reliance restricts the banking sector’s capacity to achieve lending ratios comparable to those in economies with differing fiscal frameworks.
Another major constraint is the large informal economy, with currency in circulation standing at about Rs11 trillion as of November 2025, roughly 34% of GDP. With scheduled bank deposits totaling Rs35.38 trillion, cash held outside the banking system accounts for nearly 31% of total deposits, limiting the scope for financial intermediation.
Despite these challenges, banks have continued to play a crucial role in supporting economic activity. In the SME sector, the number of borrowers increased 57% year-on-year to 276,578 in FY25, with outstanding financing rising 41% to Rs691 billion. Agricultural lending also showed recovery, with nearly 2.9 million borrowers in FY25 and record disbursements reaching Rs2.58 trillion.
Digital banking adoption has accelerated significantly. App-based banking transactions more than doubled, rising from 2.8 billion in FY23 to 6.2 billion in FY25, while Raast transactions surged from 147 million to nearly 1.3 billion over the same period, reflecting a growing shift toward electronic and formalised financial channels.
The PBA noted that achieving lending ratios similar to regional markets will depend on reducing government dependence on bank borrowing and accelerating the formalisation of the economy. Transitioning more transactions from cash to digital platforms is seen as key to enhancing financial intermediation and expanding credit deployment in the coming years.
Overall, the rise in ADR underscores the resilience and adaptability of Pakistan’s banking sector amid structural and macroeconomic constraints, signaling continued support for economic activity and digital financial growth.
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