ISLAMABAD: Pakistanis withdrew more than Rs1.03 trillion from commercial banks to invest in safer assets, including saving schemes.
The massive withdrawals reduced overall deposits in commercial banks from Rs35.49 trillion to Rs34.46 trillion during July and August 2025.
Experts said the trend reflects a significant shift driven by public behaviour, government policies, and eroding trust in the banking system.
Neither the State Bank of Pakistan nor other authorities explained where the funds were channelled — whether into gold, real estate, dollars or the stock market. However, available data suggests that a large portion of the cash moved into national savings schemes.
Sources said that people are withdrawing money from commercial banks and they do not want to come in the tax net as the Federal Board of Revenue has taken strict measures to widen the tax net and warned non-filers that their bank accounts could be frozen.
Profit rates on national saving schemes reduced
According to sources, such measures have made citizens more cautious, prompting them to shift funds into alternative avenues instead of keeping money in banks, in order to avoid the scrutiny of tax authorities.
According to the data, in July 2025 alone, over Rs44 billion was invested in National Savings Schemes, up from about Rs29 billion in June.
A January 2025 report had also shown Rs31 billion in new investments in these schemes, indicating that people increasingly prefer government bonds and certificates over bank deposits.
According to analysts, falling interest rates are a key reason behind the shift. When the policy rate stood at a record 22 per cent last year, deposit returns were attractive. But with the central bank slashing it to 11 per cent, deposit yields have dropped to a level that barely cushions inflation. This has pushed savers and investors toward more profitable or at least safer assets.
SBP reserves rise by $69.5 million, while commercial banks face decline
As a result, many people have turned to gold, real estate, stocks and foreign currency. Gold, traditionally seen as a safe investment in Pakistan, has witnessed an extraordinary surge in demand in recent months.
Pakistan Institute of Development Economics former head Dr Ikramul Haq told Urdu News that people move funds into assets they deem safer whenever trust in banks weakens and government policy appears uncertain. “That is why investments in the dollar, gold and real estate are rising,” he said.
He said that the trend makes the economy more undocumented and complicates tax collection for the government.
Observers also noted that Pakistani banks largely invest deposits in government bonds and securities, leaving little space for private-sector lending. In such an environment, many business owners prefer to invest directly in their enterprises or property.
“This is not just a product of financial uncertainty,” Dr Haq said. “It is also a form of resistance against taxation and documentation. When people believe their assets will be drawn into the tax net, they prefer to keep them outside the formal system. The government must restore public confidence so that people feel secure in keeping assets in banks and the documented economy.”
Experts warned that if the trend continues, banks could face a liquidity crisis, restricting their lending capacity and slowing business activities.
They said that heavy flows into real estate and gold could also create distortions in those markets, potentially triggering a broader financial crisis in the future.