Pakistan’s banking sector remained cautious in June 2025, as the Advance-to-Deposit Ratio (ADR) dropped to 38.1%. This is a decline from 39.8% in May and 40% in June 2024. The data, released by Arif Habib Limited, shows that banks are still avoiding risk by limiting loans to the private sector. Despite some signs of increased demand for loans, banks are hesitant to lend aggressively.
Meanwhile, banks continue to favour investments in government securities over private credit. The Investment-to-Deposit Ratio (IDR) stood at 103% in June. Though slightly down from 105.8% in May, it remains much higher than 96.9% a year ago. This shows banks still prefer government lending due to better returns and lower risk.
Analysts believe this trend reflects ongoing concerns about credit risk and economic uncertainty. Instead of supporting private businesses through loans, banks are choosing treasury bills and bonds. Government borrowing needs remain high, leaving less room for the private sector. As a result, many businesses may struggle to access financing for growth.
On a positive note, total bank deposits reached Rs35.5 trillion in June, rising 14.1% year-on-year. This strong growth gives banks more liquidity to use for lending or investing. However, the growth in advances was slower, reaching Rs13.5 trillion—an increase of 8.7% from last year. This imbalance further shows banks’ preference for safe investments.
Unless the private sector regains confidence and loan demand picks up strongly, the current trend is likely to continue. Analysts expect the State Bank of Pakistan to keep its cautious stance. With fiscal pressures still high, banks may stick to low-risk investments in the near term.