ISLAMABAD: The Net Domestic Assets (NDA) of the banking system of Pakistan have expanded up to Rs 743 billion in the first half of the current fiscal year which marked a growing economic activity in the country.
“Volume of NDA of country’s banking system in the first half of the previous fiscal year was Rs 595.3 billion,” a well placed source at the Finance Ministry told Customs Today on Thursday, adding that the rise in NDA could be traced to government’s borrowing for budgetary finance and some other factors.
Banking formally started in the country during the period of British colonialism and after independence the scope of banking in Pakistan has been increasing and expanding continuously. According to careful estimates a meagre percentage of the population uses the banks despite the fact country has tremendous potential.
The source said that government borrowed Rs 271.7 billion from the banking system in second quarter of the current fiscal year, in addition to Rs 200.0 billion borrowing in the first quarter of the year. “Within banking system, the government heavily relied on State Bank of Pakistan’s (SBP) funding” the source added saying that government borrowed Rs 462.8 billion from SBP, which was 98.1 % of the total government borrowing from the banking sector in the first half of the fiscal year.
The source observed that in the banking system, there was a change in the source of deficit financing in the second quarter of the year, however, economic managers extensively relied on the central bank in first quarter of the fiscal year and retired some of the borrowing from commercial banks, but this trend reversed in the second quarter of the current fiscal year.
“This was primarily facilitated by the shift in SBPs monetary policy stance, specifically, the 50 bps increase in the policy rate revived commercial bank interest in government securities, which helped fiscal authority to contain its borrowing from the central bank, but the government could not limit its quarterly borrowing to zero as prescribed in the SBP Act because the government was also unable to contain its borrowing from SBP within the limit agreed with IMF” the source added.
The source said that the conditions led the recovery in the consumer financing to spread, as an increasing number of banks were positioning themselves to benefit from this segment of the economy.
