Governor State Bank of Pakistan (SBP) has urged banks to reorient their business models towards stronger retail deposit mobilisation and greater private-sector financing, emphasising that the banking
sector has a critical role to play in supporting Pakistan’s next phase of sustainable economic growth.
Addressing the 11th Pakistan Banking Awards 2026 in Karachi, the Governor said Pakistan’s economy
had demonstrated resilience despite a challenging FY26 marked by domestic and external shocks,
including severe floods, geopolitical tensions and an uncertain global trade environment. He noted
that inflation averaged close to the medium-term target range, inflation expectations remained
broadly anchored, and the current account deficit stayed close to the lower bound of the projected
range. Foreign exchange reserves also continued their upward trajectory, comfortably exceeding the
end-June target of $18 billion, with the quality of reserve accumulation improving as the increase was
driven mainly by SBP’s foreign exchange purchases rather than debt-driven accumulation.
The Governor emphasised that while policymakers had achieved the difficult task of stabilising the
economy, stabilisation alone was not sufficient to put Pakistan on a path of high and sustainable
growth. He said the banking sector had a particularly important role to play in this next phase.
Highlighting the resilience of the banking industry, the Governor noted that banks’ total assets had
reached Rs 69 trillion, while deposits stood at Rs 43 trillion at end-June 2026. Profitability remained
strong and banks’ Capital Adequacy Ratio continued to remain comfortably above both international
benchmarks and domestic regulatory requirements.
At the same time, he pointed to significant opportunities for strengthening financial intermediation.
Despite substantial growth, banking-sector assets and deposits remain relatively low as a share of GDP
compared with other emerging markets, while Pakistan’s currency-to-deposit ratio remains elevated.
The Governor said there was considerable room to further reduce reliance on cash and strengthen the
deposit base. He encouraged banks to compete more actively for retail deposits, including offering
attractive returns alongside quality services. A stronger culture of retail deposit mobilization, he said,
would broaden financial inclusion while providing banks with a more diversified and stable funding
base.
Governor also called for greater private-sector credit, noting that credit penetration in Pakistan
remains well below that of emerging-market peers and that the ratio of bank credit to the private
sector relative to GDP has declined significantly over the past three decades. He said the government’s
budgetary financing needs were not the only explanation for this trend, as several emerging
economies with higher government domestic debt have significantly higher private-sector credit-to-
GDP ratios. He therefore encouraged banks to reorient their business models towards mobilizing
higher deposits and providing greater financing to the private sector.
