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But NCB, the kingdom's largest bank, broke the trend to increase deposits by 1% to 317.7 billion rupees. Deposits with the Islamic Development Bank also increased by 4%. In 2016, the government injected deposits into the banking system to offset a shortage of financing due to falling oil prices, which increased the cost of financing.
But crude prices are recovering in part, and the central bank wants to avoid moving funds by raising interest rates in line with US interest rates. As a result, monetary authorities said earlier this year that they would terminate emergency financing, drawing money out of the banking system.
Data from the central bank showed Sunday that government deposits of all commercial banks were down 11.7% In 1965, term deposits and savings accounted for $ 313.6 billion, while that private sector deposits rose sharply, so that deposits of commercial banks only decreased by 1.2% to 1.61 trillion rupees.
The contraction of deposits is a risk of a new shortage of financing in the banking sector However, the weak economic growth of the Kingdom keeps the demand for funds at a low level. On an annualized basis, bank lending to the private sector increased only 0.6% in June.
Central bank data show commercial loan-to-deposit ratio drops to 78.1% in June, well below maximum allowed (90%), suggesting banks have ample space to increase the loans if the demand for credit resumes.
The central bank changed the loan-to-deposit ratio equation in April, giving long-term deposits greater weight to encourage banks.
[Reuters]
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