After years of subdued activity, the private sector borrowed Rs806.3 billion from banks in the last fortnight of October, signalling a turnaround in credit demand following multiple cuts in the policy rate, according to data from the State Bank of Pakistan (SBP).
Despite the central bank slashing the rate from 22 percent to 11 percent, most businesses had remained cautious, seeking deeper reductions to offset high borrowing costs. However, renewed inflationary pressure — with the Consumer Price Index rising to 6.2 percent in October — appears to have prompted a shift in sentiment.
Lending to the private sector in FY26 to date has been significantly higher than the Rs66 billion recorded during the same period last year.
The SBP, which has repeatedly criticised banks for preferring government securities over private lending, has urged stronger credit flows to stimulate growth and employment.
SBP Governor Jameel Ahmad, speaking at the CFA Society Pakistan’s annual ceremony on Monday, acknowledged that “a persistent gap in credit and investment needs” remains, calling for reforms to capital markets, alternative investment options, and simpler procedures to expand financial access.
In FY25, total private sector borrowing stood at Rs1.081 trillion — more than double the Rs513 billion in FY24. During the first four months of FY26, conventional banks lent Rs344 billion compared to a Rs68 billion retirement last year, while Islamic banks extended Rs318.5 billion against Rs16.5 billion previously. Islamic windows of conventional banks lent Rs143.7 billion, slightly below last year’s Rs151 billion.
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