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The commercial banks’ reliance on government papers/securities for making investment and securing safe returns is continuing, as an amount of more than Rs. 1 trillion has been invested by conventional and Islamic Banks so far in 2017.

According to the statistics from State Bank of Pakistan (SBP), the investment of the commercial banks has increased to Rs. 7.526 trillion by end of October 2017 primarily in the government papers and securities including Pakistan Investment Bonds (PIBs), Market Treasury Bills (MTBs) and Government Ijara Sukuk (GIS).

Comparing the numbers from last year, it was revealed that commercial banks’ investment in the government papers stood at Rs. 6.446 trillion by end of 2016, which means the investment figures increased by a trillion in merely ten months of 2017.

The investment in PIBs reduced to Rs. 2.762 trillion by October-end from investment figures of Rs. 3.020 trillion till December 2016, since a majority of banks avoided making investments in PIBs, mainly because of low yields or profit rates.

However, the investment in MTBs witnessed an increase of more than twofold to reach Rs. 7.526 trillion from Rs. 3.142 trillion. The change in investment pattern is because of the banks’ strategy to invest in papers for short-term period against low returns.

Investments made by Islamic Banks surged to Rs. 367 billion by October 2017 against Rs. 342 billion at the end of 2016.

The banking sector usually makes their investment in the government papers due to reduced risk and lack of administrative expenses. This trend is highly unhealthy in terms of economic benefit to the society through banks, as pointed out by the financial experts.

Besides commercial banks, mutual funds manager, insurance companies and different corporations parked their liquid reserves in the government papers to earn fixed returns from risk free sources.

Therefore, their investment in the government papers also surged to Rs. 1.715 trillion by October 2017 compared with Rs. 1.568 trillion by 2016-end.

Hence, the investment share of these entities stand at 18.4 percent in the overall value of Rs 9.242 trillion, while the banking sector’s share stood at 81.6 percent.

The insurance companies’ investment surged to Rs. 693.8 billion. The investment by fund managers increased to Rs. 340 billion by October 2017 and other corporate investments increased to Rs. 680 billion.

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