KARACHI: The State Bank of Pakistan (SBP) has reported decline in banking sector’s spread, which shrank by 32 basis points on a month-on-month basis to reach 5.47% in July.
According to the data released by the central bank, due to the difference between lending and deposit rates, the banking spread had averaged 5.79% in the preceding month. In July, cost of deposit remained increased against a lower lending rate. The lending rate hovered at a 10-year low due to the lagged impact of a discount rate cut.
In contrast, the yield on deposits increased 11 basis points to 3.95% in July as opposed to 3.84% reported in June, SBP data shows. Although the banking spread widened a little in June, it has mostly been shrinking since the end of 2014 in the wake of ‘accommodative’ monetary policy being pursued by the SBP.
The cost of fresh deposits followed the opposite trajectory, as it increased 40 basis points to 5% in July. This reduced the spread on fresh deposits to a multi-year low of 2.87%.
