KARACHI: The Islamic Banking Industry's Non-Performing Finances (NPFs) to financing decreased to 3.2 percent by end of CY20 compared to 9.2 percent of the overall banking industry.

According to the State Bank of Pakistan (SBP), the assets quality indicator of the Islamic banking industry has improved as NPFs fell sharply during the last calendar year (CY20).

Asset quality indicator of IBI, i.e., NPFs to financing (gross) decreased from 4.3 percent by end December 19 to 3.2 percent by end December 2020.

Similarly, net NPFs to net financing also decreased to 0.6 percent in December 2020 down from 2 percent in December 2019 due to a decrease in NPFs. Non-Performing ratio of IBI is considerably lower than the overall banking industry ratio of 9.2 percent. At the end of December 2020, liquid assets to total assets and liquid assets to total deposits of IBI experienced growth and stood at 28.7 percent and 36.2 percent, respectively.

Financing to Deposits (FDR) of IBBs stood at 63.2 percent whereas for IBs it was reported to be 50.4 percent in December 2020.

Collectively, financing to deposits ratio of IBI stood at 55.5 percent, significantly higher than the FDR (44.8 percent) reported for the overall banking industry.

The ratios of capital to total assets and capital minus net NPAs to total assets of IBI were recorded at 6.1 percent and 5.7 percent, respectively, by end December 2020.

Copyright Business Recorder, 2021