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colonialism in the South Asia. After independence from British Raj in 1947, and the
emergence of Pakistan as a country in the globe, the scope of banking in Pakistan
has been increasing and expanding continuously. Pakistan's oldest bank is the State
Bank of Pakistan, which is also the central bank of the nation. Before independence
on August 14, 1947, the Reserve Bank of India was the central bank of what is now
Pakistan. After independence, Muhammad Ali Jinnah took actions to establish a
central bank in Pakistan which resulted in the new founding of the State bank of
Pakistan, with its headquarters to be based in Karachi. Only 7% of the population
uses the banks, has tremendous potential, but this needs to be pushed a little
further.
Introduction to Sector:
Financial sector in Pakistan possesses a wide spectrum of financial institution commercial
banks, specialized banks, national saving schemes, insurance companies, development finance
institutions, investment banks, and stock exchanges, corporate brokerage houses, leasing
companies, discount houses, micro finance, institution and Islamic banks.
They offer a whole range of products and services both on the assets and liabilities side.
Financial deepening has intensified during the last several years but the commercial banks are
by far the predominant players accounting for 90 percent of the total financial assets of the
system. Among the commercial banks, 12 foreign and 20 domestic banks together hold 80
Percent of the banking system assets - a feat that is unparalleled among developing
countries. Foreign banks enjoy the same facilities and same access as the domestic banks and
there is no preferential treatment for domestic institutions. Unlike many countries, foreign banks
can have 100 percent ownership, can open their branches or establish local subsidiary with full
ownership. Foreign companies are also provided level playing fields as they can raise finances
of all types and tenures from the domestic banking system. Banking industry is presently facing
a hyper turbulent situation where banks have to operate in increasingly competitive and
complex local and global markets. The ability to compete in the fast paced global environment
is of paramount importance survival of the fittest being the name of the game.
The
competition has even become ever tough and challenging with the entry of many foreign worldclass banks and other financial institutions.
What is BANK?
Banking in fact is primitive as human society, for ever since man came to realize the importance
of money as a medium of exchange; the necessity of a controlling or regulating agency or
institution was naturally felt. Perhaps it was the Babylonians who developed banking system as
early as 2000 BC. IT is evident that the temples of Babylon were used as Banks because of the
prevalent respect and confidence in the clergy.
The partition plan was announced on June 3, 1947 and August 15, 1949 was fixed as the date on
which independence was to take effect. It was decided that the Reserve bank of India should
continue to function in the dominion of Pakistan until September 30, 1948 due to administrative
and technical difficulties involved in immediately establishing and operating a Central Bank.
At the time of partition, total numbers of banks in Pakistan were 38. The total deposits in
Pakistani banks stood at Rs.880 million whereas the advances were Rs.198 million. The
Governor General of Pakistan, Muhammad Ali Jinnah issued the order for the establishment of
State Bank of Pakistan on 1st of July 1948.
Private Banks:
Islamic Banks: