Banking transactions during Eidul Azha


Every year, many billions of rupees are withdrawn from bank accounts before Eidul Azha. But it’s difficult to quantify the drawdown on deposits to finance the acquisition of sacrificial animals. Life beyond the trading of sacrificial animals continues, necessitating banking transactions.

Gross withdrawals from bank accounts a month before Eidul Azha, however, provides a crude hint of paying on sacrificial animals through banking transactions. Trading in these animals financed through movements of funds out of the banking industrythanks to the presence of an outsized informal economy is completely different. which constitutes an outsized part of spending on the Eidul Azha economy. a stimulating part of the story is that even the cash circulating within the informal economy and changing hands during Eidul Azha partially flows towards the banking industry. And conversely, a part of the cash withdrawn from banks before Eidul Azha gets lost within the vortex of pre-and-post Eid transactions outside this technique.

During Eidul Azha of 2020, gross withdrawals totaled Rs327.6 billion fortnight before Eid, a careful reading of the depository financial institution of Pakistan’s (SBP) stats show. an outsized part of it is often linked to the trading of sacrificial animals. But this happened just after Pakistan’s economy declined by 0.5 percent in 2019-20. (Last Eidul Azha was celebrated on July 31, 2020 — exactly a month after June, the last month of Pakistan’s fiscal year).

This year things are way better. Pakistan’s economy grew by about 4pc in 2020-21 that closed June. we will rightly expect expansion within the trade of sacrificial animals and, hence, larger gross withdrawals from bank deposits. But one will need to wait till mid-August to ascertain the impact of Eidul Azha 2021 on banking deposits because by that point SBP would have hopefully updated the stats on gross deposit withdrawals immediately before Eid.

Money circulating within the informal economy and changing hands during Eid partially flows towards the banking industry and conversely, a part of the cash withdrawn from banks before Eid gets lost within the vortex of transactions outside the system

Regardless of how effectively movements in banks’ deposit base can reflect larger spending on sacrificial animals this year compared to the last year, reading of these movements would be interesting.

What is getting to make that reading more insightful and interesting is that unlike during last Eidul Azha a singular factor had already caused a surge in banks’ deposits before this Eid.

Apart from an economic process that results in natural growth in bank deposits, the gushing flow of exchange via Roshan Digital Accounts of overseas Pakistanis caused an expansion within the deposit base of banks. These accounts became operative after the previous Eidul Azha, in September last year. Their impact on Eidul Azha 2021 related drawing on deposits is going to be felt for the primary time now.

As mentioned earlier, gross withdrawals from bank deposits before Eidul Azha can crudely indicate the extent of withdrawals meant for the acquisition of sacrificial animals. But the SBP, economic think-tanks, and reputed institutions of upper studies in economics and finance can develop statistical research models and tools to quantify such withdrawals with some accuracy. Readings of the movements of bank deposits with the assistance of such models and tools are going to be helpful in developing a more informed opinion of what proportion of money changes hands via banking transactions during Eid-ul-Azha.

Some economic think tanks and institutions of upper studies have already conducted studies to estimate overall Eidul Azha spending in Pakistan and its impact on the redistribution of resources. the event of analytical tools and statistical models for estimating money circulation via formal channels before Eidul Azha seems to be the natural follow-up of these studies.

The phenomenal growth in electronic banking and e-commerce has facilitated the trade of sacrificial animals even as it’s facilitated the whole spectrum of all trade transactions. At an equivalent time, it’s also changed the dynamics of banking transactions before Eidul Azha.

Previously, there won’t be a delay of 4 to 6 weeks between pre-Eid withdrawals and their ultimate return to the banking industry after changing hands and after partial loss to the undocumented economy. But e-banking has reduced this point lag. it’s difficult to determine how quickly the cash withdrawn from banks before Eidul Azha now finds its way back to bank deposits.

But a careful reading of the relevant stats of last year reveals the delay was no quite three to four weeks. For this year, this point gap may end up to be even shorter — because of a meteoric rise in e-banking amidst the Covid-19 pandemic. (At the top of June 2020, ie just before Eidul Azha 2020, mobile banking users and internet banking numbered 8.188 million and three .814m respectively. By the top of March 2021 ie quite three months before Eidul Azha 2021, these numbers surged to about 9.858m and 4.979m, consistent with the newest SBP stats).

In addition to movements in banks’ deposits, another thing that’s important to note before Eidul Azha is banks’ agricultural lending generally — and their lending to the livestock sub-sector especially, growth in personal loans also as growth in lending to small- and medium- enterprises (SMEs), particularly trading SMEs.

Increased or decreased general lending to agriculture may partly explain changing financial needs of agriculturists before Eidul Azha.

And, increased lending to the livestock also as a bigger offtake of private loans are often attributed, a minimum of partially, to spending on sacrificial animals.

Similarly, increased lending to trading SMEs a couple of months before Eidul Azha can also be attributed, to some extent, to the financing of sacrificial animals’ trade. But these proxies have their limitations. it’s difficult to assess, for instancewhat proportion of general agricultural lending during a year of high agricultural growth is happening thanks to this sectoral growth and the way much in reference to Eidul Azha. Or, what proportion of upper lending to the livestock sector before Eidul Azha is thanks to the investment being made in sacrificial animals and the way many thanks to other factors. Larger personal loans offered before Eidul Azha can also show an increasing trend for other reasons like people’s and businesses’ fight against Covid-19 induced joblessness with the assistance of extra-concessionary loans being offered under the government’s economic stimulus package.

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