KARACHI: Due to conservative lending strategy and low credit demand, the advances of the banking sector has increased by 9 per cent to Rs4.4 trillion in 2014 as compared to 6 per cent or Rs4.0 trillion in 2013 as the advances growth has been increasing for the last 3 years with the average of 5 per cent.
Meanwhile, the total deposits of commercial banks increased by 11pc in 2014 to reach Rs8.3 trillion whereas, M2 growth during the period stood at 13pc.
Deposits growth has been slower when compared to average growth rate of 13pc during the last 3 year but it is line with lower M2 growth. M2 growth has also been witnessing a declining trend recently due to contained government borrowings and higher foreign inflows.
Investment to Deposit Ratio (IDR) of banks increased to 61.2pc in 2014 as compared to 54.1pc during the last year. Investment in government securities is at an all time high as an IDR of 61pc has never been achieved previously.
Total outstanding stock of Net Foreign Assets (NFA) increased by Rs562b in 2014 as against a contraction of Rs436b during the same period last year.
On the other hand, Net Domestic Assets (NDA) increased by Rs396b as compared to an increase of Rs1.6tr in the corresponding period last year. Analyst expects this trend to continue in near term as government is focusing on fiscal consolidation. Total investments of scheduled banks surged by a sharp 26pc in 2014 as bank invested heavily in long term Pakistan Investment Bonds (PIBs). Law & order issues, energy crisis and risk of NPLs forced banks to park their investments in government securities.
