Pakistan’s banking sector recorded a continued decline in its gross Advance-to-Deposit Ratio (ADR), which fell to 38.1% as of June 2025, according to data from Arif Habib Limited. This marks a drop of 172 basis points (bps) month-on-month from May 2025 (when ADR was 39.8%), and a 186 bps decline year-on-year compared to June 2024 (40%).
The declining ADR indicates that banks are lending a smaller portion of their deposits, reflecting a cautious credit environment—possibly due to tighter economic conditions, low private-sector demand, or regulatory pressures.
Meanwhile, the Investment-to-Deposit Ratio (IDR) stood at 103% in June 2025, down from 105.8% in May 2025, but up significantly from 96.9% in June 2024, a 608 bps increase YoY. This suggests banks are continuing to pour funds into government instruments, lured by high yields and safer returns amid economic uncertainty.
Key Figures:
- Deposits: Rs 35.5 trillion (↑14.1% YoY, ↑8.5% MoM)
- Investments: Rs 36.6 trillion (↑21.2% YoY)
- Advances: Rs 13.5 trillion (↑8.7% YoY, ↑3.8% MoM)
Analysts on X are debating whether this trend poses long-term risks for private sector growth, as the crowding out effect limits access to credit for businesses. They also note that some banks are introducing charges on large deposits to manage balance sheet ratios, a controversial move that has sparked mixed reactions from depositors and economists.
Though the sector remains financially stable—reflected in a price-to-book ratio of 1.24x as of June 2025—analysts caution that heavy reliance on government borrowing may be unsustainable. The State Bank of Pakistan’s ongoing efforts to transition toward a fully Islamic banking system by 2027 could also reshape future credit and deposit structures.
As Pakistan’s financial landscape evolves, the focus now lies on how banks balance profitability, regulatory compliance, and their role in supporting real economic growth.
Published in SouthAsianDesk, July 15th, 2025
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