Over Rs. 1 Trillion Pulled Out of Pakistani Banks in Just 2 Months

Pakistan’s commercial banks have witnessed a major reversal in fortunes, with deposits falling by more than Rs. 1 trillion during the first two months of the ongoing fiscal year 2025-26. The steep decline has raised fresh concerns about the stability of banking inflows as customers increasingly turn to alternative avenues for investment.

Deposits Shrink After Record Highs

According to the State Bank of Pakistan (SBP), total withdrawals amounted to Rs. 1.035 trillion in July and August combined. As a result, aggregate deposits slid to Rs. 34.46 trillion by the end of August, compared to an all-time high of Rs. 35.49 trillion recorded on June 30, 2025.

This sudden reversal came only weeks after banks celebrated their strongest deposit growth in history at the close of FY25, making the recent slump even more striking.

Why Depositors Are Pulling Funds

Analysts have attributed the sharp outflow to two key factors:

1. Falling Interest Rates

The central bank’s policy rate has dropped dramatically to 11%, down from last year’s peak of 22%. With depositors now earning lower returns, many have shifted their savings into more lucrative opportunities such as the stock market, gold, and other high-yielding investments.

2. Stricter Tax Enforcement

The government’s push to expand the tax base has also added pressure. The Federal Board of Revenue (FBR) has issued warnings of tougher measures, including the possibility of freezing bank accounts held by non-filers. This has made many depositors cautious about keeping large sums in commercial banks.

Outlook for the Banking Sector

While the shift of funds into alternative assets indicates growing investor appetite outside the banking sector, the decline in deposits poses challenges for banks that rely heavily on customer balances to support lending and liquidity.

Market experts suggest that unless interest rates stabilize or incentives are introduced, banks could continue facing pressure as depositors diversify their holdings.