KARACHI: The Pakistan Banks Association (PBA) said on Monday that comparisons between Pakistan’s lending ratios and those of regional peers are unfair unless the underlying fiscal structures are also compared.
Addressing the specific statistics circulating in the media, the PBA highlighted that reports citing an advance-to-deposit ratio (ADR) of 35 per cent are based on obsolete data from June 2025, it said in the statement.
In the months since, the sector has witnessed a consistent uptick in lending activity, with the ADR rising to approximately 38 per cent by November 2025. This month-on-month increase is driven by a massive Rs1.5 trillion injection into private sector credit over the current fiscal year, a momentum that proves banks are actively deploying liquidity as fast as conditions allow.
The association also responded to comparisons between Pakistan’s lending ratios and those of regional peers like India and Bangladesh, calling them unfair unless the underlying fiscal architectures are also compared. Unlike its neighbours, Pakistan’s government relies almost exclusively on commercial banks to fund its operations, borrowing nearly 99.8 per cent of its deficit financing directly from the banking sector. The PBA noted that it is structurally impossible to expect banks to maintain lending ratios comparable to regional economies when they are carrying a fiscal burden that their regional counterparts do not.
Furthermore, the comparison is severely distorted by the massive scale of Pakistan’s informal economy. The PBA pointed to the staggering volume of currency in circulation (CIC), which stood at approximately Rs11 trillion as of November 2025. This equates to roughly 34 per cent of the country’s GDP -- a ratio that is more than double the levels seen in neighbouring India and Bangladesh.
To put this leakage into perspective, while scheduled banks held Rs35.38 trillion in total deposits as of November 2025, the cash circulating outside the system is equivalent to nearly 31 per cent of that entire deposit base. The PBA argued that this “shadow economy” acts as a massive barrier to financial intermediation; banks cannot lend to what they cannot see, and until this capital enters the formal net, comparisons with fully formalised regional markets will remain skewed.
“Despite these significant structural headwinds, the banking sector has continued to fuel the economy where space permits, delivering exponential growth in priority sectors and digital adoption over the last three years,” the PBA said.
“In the SME sector, banks achieved a 57 per cent year-on-year (YoY) surge in the borrower base, adding over 100,000 new businesses to reach 276,578 in FY25, while outstanding financing jumped 41 per cent to Rs691 billion,” it added.
Simultaneously, the sector reversed a five-year historic decline in agricultural access; after falling continuously since FY19 to 2.7 million in FY24, the borrower base rebounded to nearly 2.9 million in FY25, supported by a record Rs2.58 trillion in disbursements.
On the digital front, the transformation is equally profound: app-based banking transactions have more than doubled from 2.8 billion in FY23 to 6.2 billion in FY25, while Raast transactions skyrocketed eightfold from 147 million to nearly 1.3 billion over the same period.
