All local and foreign banks have made over 90 per cent of their investment in government papers according to State Bank in its Quarterly Compendium for March 2016.
Surprisingly banks are making profits in business with the government, but the trend has crowded out the private sector. The five major banks, having 51.2pc assets of the entire banking industry, have 90pc of their investment in government papers.
The government hoped that low interest rate would boost economic activities, but results show that credit off-take by the private sector during the current fiscal year was poor and disappointing.
Some bankers said the government is the sole beneficiary of low interest rate as it contained its liability of repayment on bonds and securities papers.
According to the report, 100pc investment of the foreign banks operating in country is in government papers. Similarly, specialised banks’ investment was over 84pc till March 2016.
Medium size banks from 6 to 10 position have over 94pc investment in government papers. Small banks also have 93pc investment in government papers.
The economy posted 4.7pc growth for the current fiscal year, but independent economists believe the actual expansion was less than the declared and the rate was inflated to bring down the debt-to-GDP ratio close to 60pc required to convince the IMF.
Another report of the State Bank showed that private sector credit off-take during the first 11 months was Rs249bn which was higher than last year’s Rs146bn but the change is less than sufficient to energise the economy for high growth.
Share of total deposits of the banking industry was largely held by the 5-big banks as their share was 51.6pc. However, more significant is the share of deposits of foreign banks which was just 1.2pc.
The small banks having positions from 21 to 28 are struggling to improve their deposits, but their share in deposits was just 3.1pc. Banks having position of 6 to 10 have 24.1pc share while banks at the positions of 11 to 20 have 19.7pc share in the deposits of the banking industry.
The Big-5 banks share in profits of the industry was 59.6pc while banks in second order (6 to 10) could get a share of 17.6pc.
However, banks in fourth order (21 to 28) could hardly get 1.2pc share in the profits of the industry. The foreign banks performed well as their share in deposits was just 1.2pc but they earned 3.1pc profits
