State Bank of Pakistan (SBP) Governor Jameel Ahmed has called on banks to reshape their business models by placing greater emphasis on mobilising retail deposits and expanding financing to the private sector, saying the banking industry has an important role in supporting Pakistan’s next phase of sustainable economic growth. Speaking at the 11th Pakistan Banking Awards 2026 in Karachi, the governor said the country’s economy had demonstrated resilience during FY2026 despite a series of domestic and external challenges, including severe floods, geopolitical tensions and uncertainty surrounding global trade.
Ahmed said several macroeconomic indicators had shown improvement during the fiscal year. Inflation remained close to the medium-term target range, while inflation expectations were broadly anchored. The current account deficit also remained near the lower end of the projected range, indicating that external imbalances had remained contained. At the same time, Pakistan’s foreign exchange reserves continued to increase and exceeded the end-of-June target of $18 billion, providing additional support to the country’s external position.
The governor also highlighted the expansion and financial strength of Pakistan’s banking sector. Banks’ total assets had reached Rs69 trillion by the end of June 2026, while deposits stood at Rs43 trillion. He said banks remained profitable and maintained capital adequacy ratios comfortably above both international standards and domestic regulatory requirements. These indicators point to a banking sector with substantial financial capacity, although Ahmed stressed that the sector still has considerable room to improve its role in financial intermediation and in directing funds towards productive areas of the economy.
According to the SBP governor, Pakistan’s banking assets and deposits remain relatively low as a proportion of gross domestic product when compared with other emerging markets. This indicates that a significant portion of economic activity and household savings remains outside the formal banking system. Ahmed also highlighted Pakistan’s high currency-to-deposit ratio, which indicates continued reliance on physical cash. He urged banks to take steps to reduce this dependence and encourage more individuals and businesses to keep their funds within the formal financial system.
Ahmed specifically encouraged banks to compete more actively for retail deposits by offering customers attractive returns alongside high-quality banking services. A stronger retail deposit base would provide banks with a broader and more diversified funding source while also supporting greater financial inclusion. Bringing more household savings into formal banking channels could increase the pool of funds available for financing economic activity and provide customers with greater access to formal financial products and services.
The governor also placed significant emphasis on the need to increase lending to private businesses. He noted that credit penetration in Pakistan remains considerably below levels seen in comparable emerging markets, limiting the banking sector’s contribution to private investment and business expansion. The ratio of bank credit to the private sector relative to GDP has declined substantially over the past three decades, highlighting a long-term reduction in the share of economic financing being directed towards private sector activity.
Ahmed said the decline in private sector credit cannot be explained solely by the financing requirements of the government. He pointed out that several emerging economies with relatively high levels of domestic government debt still maintain significantly higher private sector credit-to-GDP ratios than Pakistan. This comparison suggests that banks can expand private sector financing even in environments where governments have substantial domestic borrowing needs, provided banking institutions develop business models that allocate a greater portion of available funding towards businesses and productive economic activity.
The governor therefore urged banks to reconsider their current business strategies and move towards greater deposit mobilisation and stronger private sector financing. Rather than relying heavily on a limited range of funding sources or concentrating financing in government securities, banks can play a larger role in connecting household and corporate savings with businesses requiring capital for expansion, investment and working capital requirements.
Greater private sector lending could also support broader economic activity by improving access to finance for businesses and encouraging investment. For banks, developing a wider private sector customer base could diversify their loan portfolios and strengthen relationships with businesses and households. At the same time, stronger retail deposit mobilisation could provide a more stable funding base and increase the banking system’s ability to finance productive economic activity.
The governor’s remarks come as Pakistan seeks to consolidate recent macroeconomic stability and move towards a more sustainable growth model. While the banking sector remains profitable, well-capitalised and sizeable in absolute terms, the relatively low levels of deposits and private sector credit compared with GDP indicate that its financial intermediation role can be expanded considerably.
Ahmed’s call for a shift towards retail deposits and private sector lending therefore places greater responsibility on banks to broaden their customer base, reduce reliance on cash and develop financing models that support businesses and households. The SBP’s focus is aimed at ensuring that the banking sector’s growing financial capacity translates into deeper financial inclusion and greater availability of credit for the private sector, supporting Pakistan’s longer-term economic growth objectives.
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