Pakistan’s commercial banks witnessed a sharp outflow of deposits, totaling more than Rs. 1 trillion, during the first two months of the current fiscal year, according to data issued by the State Bank of Pakistan (SBP).
Between July and August, depositors withdrew Rs. 1.035 trillion, reducing total bank deposits to Rs. 34.46 trillion by the end of August 2025. This marks a significant drop from the Rs. 35.50 trillion in deposits recorded on June 30.
The sudden decline has raised concerns among regulators and market analysts, who cite a combination of falling interest rates and newly introduced tax measures as key drivers behind the withdrawals. The SBP recently slashed its benchmark policy rate to 11%, down from a peak of 22% last year.
Analysts say the lower returns on savings are prompting investors to shift their money into alternative asset classes, including stocks, gold, and mutual funds. “The interest rate has been halved since June 2024, leading banks to reduce returns on deposits,” said Mustafa Mustansir, director of research at Taurus Securities. “Naturally, depositors are looking for better opportunities elsewhere.”
He also noted that seasonal factors might have contributed to the trend.
“Banks often show inflated deposit figures at the fiscal year-end in June, followed by withdrawals in the following months,” he said. “So, a dip in July-August is not entirely unusual.”
Another analyst said the trend is reflective of a broader shift in investor behavior. “Lowering of interest rates changed a perception a bit, retail and institutional clients are reassessing the value of keeping idle cash in banks,” he said. “For many, the risk-adjusted returns from capital markets or real assets like gold now outweigh traditional deposits.”
Meanwhile, aggressive tax enforcement measures introduced in the federal budget have added to depositor anxiety. The Federal Board of Revenue has begun efforts to expand the tax base, including potential freezing of bank accounts belonging to non-filers—a move that has reportedly prompted some account holders to move funds into less scrutinized or informal channels.
With interest rates down and tax-related fears rising, financial experts expect continued volatility in deposit behavior over the coming months.