Pakistan’s banking sector has witnessed a sharp shift away from private-sector lending, with the advances-to-deposits ratio (ADR) falling to just 35 per cent by June 2025, while the investments-to-deposits ratio (IDR) climbed to 100 per cent, according to a new report.
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The findings are contained in Banking Forward: Journeying Towards Future Horizons, released by PwC-A.F. Ferguson. The report shows a steady decline in ADR from 50pc in December 2024, underscoring banks’ growing preference for investments — largely in government securities — over extending credit to businesses.
In a regional comparison, Pakistan’s ADR remains significantly lower than Bangladesh at 87pc, India at 79pc and Sri Lanka at 59pc. Conversely, Pakistan’s IDR of 100pc far exceeds that of Bangladesh at 29pc, India at 33pc and Sri Lanka at 47pc, highlighting a structural imbalance in credit allocation.
The report noted that priority sector financing remains subdued, with SME lending accounting for only 3.7pc of total loans and agriculture at 4pc. This contrasts with much higher SME lending ratios in Indonesia, Bangladesh and India. Lending to the private sector has declined to 11pc of GDP in 2024, reinforcing concerns over weak credit support for economic growth.
Despite this, some improvement has been recorded. Agricultural borrowers rose to 2.9 million by June 2025, while SME borrowers increased by more than 55pc to 277,000. Agricultural financing reached Rs739bn, and SME lending climbed to Rs712bn, together exceeding 10pc of total loans for the first time in years.
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The report also highlighted structural challenges, including an undocumented economy estimated at 40pc of GDP and heavy reliance on cash. Experts stressed that greater digitisation, fiscal discipline and regulatory reforms are critical to unlocking investment, boosting exports and sustaining long-term economic progress.