By ABDULLAH 
Pakistan’s banking sector has been hit by a massive withdrawal of deposits, with more than Rs. 1 trillion pulled out in just the first two months of the new fiscal year 2025-26.
According to fresh data from the State Bank of Pakistan (SBP), deposits dropped from a record Rs. 35.49 trillion on June 30, 2025, to Rs. 34.46 trillion by the end of August. The decline of Rs. 1.035 trillion marks one of the sharpest reversals in recent years, raising fresh questions about public trust in the banking system and where this money is going.
Experts and analysts point to two major reasons:
- Last year, depositors enjoyed record-high returns when the SBP’s policy rate was at 22%.
- Now, with the rate slashed to 11%, savers find their returns almost cut in half.
- As a result, many are pulling money out of banks and investing in gold, real estate, and the stock market, where profits look more attractive.
- The Federal Board of Revenue (FBR) has intensified efforts to widen the tax net.
- Non-filers have been warned of strict action, including account freezes.
- This fear has pushed depositors to avoid keeping large sums in banks, instead shifting capital to assets that stay outside the government’s reach.
Such a large-scale withdrawal in such a short time is more than just numbers on paper. It signals a change in consumer behavior:
- People are becoming less comfortable with banks as safe storage for savings.
- Capital is moving toward alternative investments, which may increase speculation in gold and stocks.
- Banks may face liquidity pressures, making it harder to lend to businesses and industries.
Financial experts warn that if this trend continues, it could deepen Pakistan’s reliance on informal channels of savings and investment, reducing the overall stability of the banking sector.
Interestingly, this trend comes just weeks after banks reported their highest-ever deposit levels at the end of FY25. The sharp turnaround shows how quickly depositor confidence can shift when both monetary and tax policies change at the same time.
For the average Pakistani, the decision now seems simple:
- Why leave money in the bank earning low returns, when gold and the stock market promise bigger gains?
- Why risk tax scrutiny or frozen accounts when there are alternatives outside the formal banking system?
The withdrawal of over Rs. 1 trillion in two months is not just about falling interest rates or taxes it reflects a broader trust gap between depositors and the financial system. Unless policies strike a balance between encouraging savings and enforcing taxation, Pakistan’s banks may continue to lose deposits to markets and assets beyond their control.