Banks urged to focus on private credit

SBP governor says reorientation needed, cites low credit penetration despite Rs69tr assets SBP Governor Jameel Ahmed during a press conference. Photo: SBP Meta 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 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. Highlighting the resilience of the banking industry, the governor noted that banks' total assets had reached Rs69 trillion, while deposits stood at Rs43 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 mobilisation, he said, would broaden financial inclusion while providing banks with a more diversified and stable funding base. The 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 mobilising higher deposits and providing greater financing to the private sector. Meanwhile, gold prices in Pakistan rose sharply on Friday, tracking a strong rally in the international market that pushed the metal to its highest level in more than three months. In the local market, 24-carat gold was quoted at Rs477,136 per tola, gaining Rs5,200.