Banking sector deposits swell defying lower interest rates

Customer deposits in the licensed commercial banking sector continued to grow at a faster rate from 2024 through the second quarter of 2025 despite the interest rates on deposits slumping in line with the decline in market interest rates.

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According to the Central Bank, the growth was driven by State commercial banks followed by private sector commercial banks with foreign commercial banks failing to make much traction during the period.

“The rise in deposits was mainly driven by state banks as well as domestic private banks, aligned with increasing private sector credit flows, supported by a low interest rate environment,” the Central Bank said in their recently released Market Operations Report.

The data showed that the rupee deposit liabilities had risen by as much as Rs.559.2 billion in the three months through March 2025 to Rs.12,883.0 billion followed by another Rs.351.3 billion in the second quarter of 2025 to Rs.13,234.3 billion.