Bank lending to private sector surges

Liquidity flow from banks to the private sector has changed dramatically, with advances surging to Rs447 billion in the first four months of this fiscal year, compared to a net debt retirement of Rs153 billion in the corresponding period last year. Experts said the surplus liquidity in the government’s account and the steep fall in the interest rate have changed banking in Pakistan. The government is borrowing cautiously after receiving an injection of Rs2.7 trillion from the State Bank of Pakistan (SBP) in profits. This surplus liquidity allowed the government to reject almost all bids for treasury bills and started borrowing relatively for longer tenors less than the auction targets. The government’s borrowing strategy change has created a liquidity surplus, compelling banks to lend excessively to the private sector.