Pakistan’s banking sector maintained its growth trajectory in September 2025, with total deposits climbing 12.3 percent year-on-year to reach Rs. 35.2 trillion, according to data released by Arif Habib Ltd. The increase in deposits reflects continued resilience in the financial system, supported by stable liquidity conditions and rising confidence among depositors amid macroeconomic adjustments.
The data revealed that advances – the total loans extended by banks – also recorded a 9.4 percent increase, reaching Rs. 13.5 trillion. Despite elevated financing costs driven by tight monetary policy, credit demand has remained robust, particularly from sectors sustaining growth momentum in manufacturing, trade, and agriculture. This steady credit expansion points to a cautiously optimistic business environment where borrowers continue to access funds for expansion and operational needs despite cost pressures.
One of the most notable developments during the period was the significant rise in banking sector investments, which jumped 16.7 percent year-on-year to Rs. 35.8 trillion, compared to Rs. 30.7 trillion in September 2024. Analysts attribute this surge to banks’ continued preference for risk-free government securities amid subdued private sector credit appetite and elevated interest rates. With Treasury bills and Pakistan Investment Bonds offering attractive yields, banks have shifted focus toward safer investments that ensure stable returns with minimal default risk.
The Advances-to-Deposits Ratio (ADR) stood at 38.2 percent in September 2025, slightly down from 39.3 percent recorded a year earlier. The decline reflects banks’ more conservative lending stance in light of monetary tightening and limited appetite for private sector exposure. Conversely, the Investments-to-Deposits Ratio (IDR) rose to 101.7 percent, marking an increase of 377 basis points year-on-year, underscoring the growing tilt toward government securities.
On a month-on-month basis, deposits grew 2.2 percent, showing consistent inflows into the banking system, while advances posted a 2.0 percent rise, indicating sustained though moderated credit activity. Investments, however, dipped marginally by 1.3 percent from August 2025, which analysts suggest could be linked to seasonal adjustments in treasury placements and short-term portfolio rebalancing by financial institutions.
Industry experts note that the ongoing strength in deposits and investment growth highlights the sector’s stability despite economic headwinds. The preference for government instruments is expected to persist until borrowing costs ease and the private sector regains stronger credit appetite. The data further reflects banks’ risk management strategies amid ongoing fiscal reforms and an evolving regulatory environment led by the State Bank of Pakistan.
As Pakistan’s financial landscape continues its gradual digital and structural transformation, the banking sector’s ability to sustain deposit and investment growth remains critical for supporting fiscal stability and ensuring liquidity in the economy. Analysts forecast that future shifts in monetary policy could potentially alter credit dynamics, encouraging more diversified lending once interest rates begin to normalize.
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