Pakistan’s banking sector is increasingly moving away from lending to businesses and individuals, with private sector loans making up only 22% of total assets as of March 2026.
This change shows a clear shift toward financing government borrowing instead of supporting private economic activity.
According to data compiled by Optimus Capital Management, total banking assets have reached around Rs60 trillion.
At the same time, the sector’s assets-to-equity ratio has increased to 18 times, reflecting higher leverage mainly supported by investments in government securities.
Analysts say banks are now placing more funds into Pakistan Investment Bonds and treasury bills.
These options are considered safer and come with fewer risks compared to lending to private businesses. As a result, banks can expand their balance sheets without facing major capital pressures.
Compared to neighboring countries, Pakistan’s private credit levels remain low. Estimates from the World Bank suggest that private credit-to-GDP ratios are around 50% in India and 40% in Bangladesh, while Pakistan’s level is significantly lower.
The shift has also changed how banks fund their operations. Wholesale borrowing now accounts for over 27% of total assets, equal to more than Rs16 trillion.
A large share of this funding comes from the State Bank of Pakistan through open market operations.
Experts warn that this trend may limit credit availability for businesses and consumers, affecting growth in areas like housing and auto financing.
They also caution that heavy reliance on government debt could create risks if economic conditions or policies change in the future.