Pakistan’s banking sector has witnessed a notable improvement in lending activity, with the Advance-to-Deposit Ratio (ADR) climbing to around 38 percent by November 2025, driven by a robust Rs1.5 trillion expansion in private sector credit, according to the Pakistan Banks Association (PBA). The development signals banks’ growing willingness to deploy liquidity as macroeconomic conditions gradually improve.

In an official statement, the PBA acknowledged recent media attention on the banking sector’s role in supporting economic activity. While appreciating coverage highlighting digitization and increased private sector lending, the association cautioned that several reports rely on outdated statistics, presenting an incomplete and misleading picture of the sector’s current trajectory.

The PBA clarified that media references to an ADR of 35 percent are based on June 2025 data, which no longer reflects on-ground realities. Since the close of the last fiscal year, lending momentum has accelerated consistently, pushing the ADR to approximately 38 percent by November 2025, underpinned by strong credit uptake across the private sector.

Addressing regional comparisons with countries such as India and Bangladesh, the association termed such parallels unfair unless fiscal structures are examined in tandem. Unlike its regional peers, Pakistan finances nearly 99.8 percent of its fiscal deficit through commercial banks, placing a unique and heavy burden on the domestic banking system that limits its ability to mirror regional lending ratios.

The PBA further highlighted the distortion created by Pakistan’s large informal economy, pointing to Currency in Circulation (CIC) of around Rs11 trillion as of November 2025, equivalent to nearly 34 percent of GDP. This level is more than double that of neighboring economies. With total scheduled bank deposits at Rs35.38 trillion, cash outside the formal system accounts for almost 31 percent of the entire deposit base, significantly constraining financial intermediation.

Despite these structural challenges, the banking sector has continued to support economic growth where space permits. In the SME sector, banks recorded a 57 percent year-on-year increase in the borrower base, adding over 100,000 new businesses to reach 276,578 borrowers in FY25, while outstanding SME financing surged 41 percent to Rs691 billion.

Similarly, the sector reversed a five-year decline in agricultural financing. After falling to 2.7 million borrowers in FY24, the agricultural borrower base rebounded to nearly 2.9 million in FY25, supported by a record Rs2.58 trillion in disbursements.

Digital transformation has also gained strong momentum. App-based banking transactions more than doubled from 2.8 billion in FY23 to 6.2 billion in FY25, while Raast transactions surged eight-fold, rising from 147 million to nearly 1.3 billion over the same period.

Concluding its statement, the PBA stressed that while banks remain a critical engine of Pakistan’s economy, achieving lending ratios comparable to regional peers will require reduced government reliance on bank borrowing and a decisive shift from a cash-based to a digitally documented economy.