m Early years of difficulties .

m Reserve Bank of India controlling both the

countries from New Delhi.
m Out 99 scheduled only 1 was in Pakistan.
m Out 3496 branches only 631 were in
Pakistan.
m Out of total paid up share of Pakistan is
10%.
m igration of Hindus.
m Administrative staff were mostly Hindus.
m Informal money lenders had gone.
m Only scheduled bank left at that time was
Australasia bank.
m Shortage of managerial level staff.
m 1st July 1948.
m Sole not issuing institute of country.
m Still did not have any press for printing of
notes.
m Huge task of establishing a banking system.
m There were foreign and Indian banks
functioning.
m Out of 1.1081b 73% was of foreign banks.
m ¢1 new branches in 18 months.
m 34 scheduled banks.
m 19¢0¶s,number of branches increased.
m Domestic savings.
m Credit for business.
m 19¢¢,Pakistani banks provided ¢¢% of the
credit advances.
m New branches in low developed areas.
m East Pakistan Vs. West Pakistan.
m One for one policy of state bank.
m Credit advances to known business
magnates.
m Concentration of economic power.
m Deposits, credits, location of banks.
m Demand for credit for industry was low.
m ore commerce then industry.
m 1948-19¢4 deposits grew by 61%.
m Revival of economic activity.
m Rehabilitation of banking sector.
m Inflow of uslim capital.
m venerally favorable balance of payments.
m Bank deposits were huge in 19¢1.
m In 19¢1 bank deposits fell due to export
incomes.
m In 19¢ and 19¢4 bank deposits were
increasing again.
m Agriculture ,forestry, fishing, hunting= 4%.
m anufacturing = 1%.
m Commerce = ¢¢%.
m Agriculture, forestry, fishing, hunting = 0%.
m anufacturing = ¢4%.
m Commerce = 6%.
m The bank nationalization ordinance.
m alpractices in banking sector.
m Concentration of credit.
m Credits not landed to deserving.
m Inspiration from India.
m 'argest banks were controlled by industrial
families , Adamjees, Saigols, Habibs,
Dawood, Sheikhs.
m 9 % of the total profit consisted of big giants.
m These families also had companies.
m September 1970 report , ¢% of total credit.
m Èourteen banks were nationalized.
m Out of 14 banks ¢ were merged.
m Now every thing was in hands of
government.
m isuse of powers and wealth.
m Credits for political purposes.
m Banks become overcrowded.
m Over all failure.
m 1977: ven. Zia Ul Haq introduced Islamic
Banking.

m 1979: Interest eliminated from:

ñ House Building Èinance Corporation.
ñ The National Investment Trust.
ñ utual Èunds of the Investment
corporation of Pakistan.
m 1979: Interest free loans to farmers.

m 1980: Èishermen and corporate societies.

m 198¢: No interest bearing deposits.

m usharaka.

m urabaha (Cost Plus).

m udarabah (Profit Sharing).

m USHARAKA:
ñ Bank ± Capital provider.
ñ Profit/ 'oss divided under a pre-determined
rate.

m URABAHA:
ñ Cost plus.
ñ Bank buys and sells at a higher rate.
ñ oney paid in installments.
ñ No additional interests.
m UDARABAH:
ñ Profit Sharing.
ñ Entrepreneur uses his labor, management
and expertise.
ñ Profits shared at pre-determined rates.

'ow response.
Tax exemptions.
Èixed interest rates.
m Private sector commercial banks.
m ¢ ain Nationalized Commercial Banks
(NCBs)
m 4 Èoreign Banks.

m 1991: 10 Private Banks.

Denationalization of 4 NCBs.
m Public sector Private sector.

m High administration cost reduced.

EAR NUBER OÈ
BRANCHES:
1964
1, 98

1971
3,418

1977
6,737
EAR NUBER OÈ
BRANCHES:
1964


 1, 98

1971
3,418

1977
6,737
EAR NUBER OÈ
BRANCHES:
1964


 1, 98

1971
3,418
 



1977
6,737
m Branches Nominal Deposits

Real Deposits

m REASONS:
oney Supply
oney from informal sector
m Bank advances

m1991- Textile sector had 1/8th of all

advances.
m 001- Reduced to 1/¢th.

m Investment purposes.
m Not for production.
m Support economic development objective.

m 'oans at subsidized rates.

m 'ong term debts.

m Èunds from World Bank.

Investment Banks 'oans Already
existing
companies.

DÈIs 'oans Emerging/ New

companies.
m 'easing companies.

m udarabahs.

m Investment banks.

m Housing financial companies.

 i i


DÈIs = 78.6% ¢7%

Investment Banks = 1.8% 1 %

'easing companies = 4.7% 11%

80%
m 1990-1997: NBÈIs

m 1997/98: NBÈIs

m „
ñ Nuclear tests.
ñ Deposits withdrawn.
ñ Èew borrowers.
ñ Economy shrinking.
m 'arge asset bases of commercial banks.

m Political pressure.

m Non-performing loans (1997) = Rs. 140

billion = 6% vDP.
m 1991:
Commercial Banks assets owned by Èoreign
banks = 6% 14%.

m Total Pre Tax Profit:

NCBs= Rs. . billion on paid up capital of
Rs. 6.4 billion.

Èoreign Banks= Rs.3.¢ billion on paid up

capital of Rs. 3.3 billion.
m 1996-1999:
vrowth Rate:
Èoreign Banks = 31.4%
NCBs = 1 .7%
Private Banks = 18. %

Administrative costs:
Èoreign Banks = 17.6% (0.8¢% of total
assets).
NCBs = 19.7% ( % of total assets).
Private Banks = 18.3%
m vross Revenue:
Èoreign Banks = Revenue > Costs.
NCBs = Revenue < Costs.

m Rate of Return on Total Assets:

Èoreign Banks = 1% - .4%.
NCBs = 0.1% - 0.3%.
m arket.
m No political pressure on foreign banks.
m NCBs forced to make advances.
m Èoreign banks more profitable in terms of
Share Holder¶s Equity and assets.
m Efficiency.
m aintenance of branches in rural areas.
m Directed by government.