Pakistan’s commercial banks experienced a significant reversal in bank deposits, with deposits plummeting by more than Rs. 1 trillion in the first two months of the fiscal year 2025-26.
Data from the State Bank of Pakistan (SBP) reveals a sharp decline, with total deposits falling to Rs. 34.46 trillion by the end of August 2025, down from a record high of Rs. 35.49 trillion on June.
This massive withdrawal of Rs. 1.035 trillion in July and August comes just weeks after banks celebrated their highest-ever deposit levels at the close of the previous fiscal year.
Low returns and tax measures drive bank deposits withdrawals
Analysts attribute this unprecedented outflow to a combination of two key factors: a significant drop in interest rates and stricter tax enforcement.
The SBP’s policy rate has been slashed to 11%, a stark contrast to last year’s peak of 22%.
This sharp reduction has diminished the returns on savings accounts, pushing customers to seek more lucrative investment opportunities.
Many are now channelling their funds into assets like the stock market, gold, and other higher-yielding avenues in search of better returns.
Customers seek alternative investments
Simultaneously, the government’s intensified push to broaden the tax base is also playing a major role.
The Federal Board of Revenue (FBR) has warned of stricter measures, including the potential freezing of bank accounts for individuals who are not tax filers.
This move has prompted many depositors to reconsider holding large balances in their bank accounts, further fuelling the shift towards alternative investments.
The trend highlights growing public apprehension and a strategic reallocation of capital away from traditional banking channels.
The outflow raises fresh concerns about the stability of the banking sector and the future of domestic savings.
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