INTRODUCTION

Financial Sector
Financial Sector in Pakistan possesses a wide
spectrum of financial institutions
-C o m m e r c i a l b a n k s , s p e c i a l i z e d b a n k s , n a t i o n a l s a v i n g s
s c h e m e s , i n s u r a n c e companies, development finance institutions
, investment banks, stock exchanges,
corporate brokerage houses, leasing companies, discount houses, m
icro-finance institutions 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 l a s t s e v e r a l y e a r s b u t t h e
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 80Percent 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.
Banks:
Banks are financial intermediaries. The role of a financial
intermediary is to sell its own obligations and to buy the
obligations of others. By endowing its obligations with attractive
features, an intermediary can sell its obligations at a higher
price than it has to pay for the obligations it buys. Or to say the
same thing in a different fashion, it can market its obligations
at a lower interest rate than it can command the obligations
it buys. The spread between the interest rate it pays on its own
obligations and the one
itr e c e i v e s o n t h e o b l i g a t i o n s o f o t h e r e x p e n s e s o f d

o i n g b u s i n e s s m u s t t h e n b e deducted. The net profi t

aft er these other deduct ions represents the return to
the shareholders for their participation in the activity of a
financial intermediary.
Central Bank:
A central bank is responsible for the monetary policy of
the country in which it operates. 'Central bank is an
institutio n which is responsible for sa feguarding the
financial stability of the country. It holds the ultimate
reserves of the nation, controls the fl ow of purcha sing
power, whether in form of credit or currency and it acts
as bankers to the state
PAKISTAN BANKING OVERVIEW PAKISTAN BANKING
FINANCIAL HUB

SECTOR-PAKISTAN

The Banking sector is an integral part of the countrys financial

services industry. These sector witnessed a phenomenal
growth in 2001-03 where deposits rose by
almost 1 0 0 % . T h e r e a r e 3 9 s c h e d u l e d b a n k s ( i n c l u d i
n g 1 1 f o r e i g n b a n k s ) o p e r a t i n g i n Pakistan. Competit i
on is relatively high, espec ially after the chal lenging
capital adequacy benchmarks set by the State Bank of
Pakistan to nourish a stable banking system. Attracting
foreign investment and winning profitable customers are the
only options left to banks for survival. Opportunities for foreign
banks, especially in consumer and retail banking, are
greater than ever before. In the financial year of 2004-05,
the banking sector experienced growth rates of 21% and 36%
in its deposit and advances portfolio respectively, which in turn,

has increased the banks stability as compared to the preceding

year.

Categorical Listing of Operating Banks

Central Bank

State Bank of Pakistan

Nationalized Scheduled
Banks

First Woman Bank Ltd.

National Bank of Pakistan
Zari Taraqiati Bank (ZTBL

Specialized Banks
Industrial Development Bank of Pakistan
Punjab Provincial Cooperative Bank Ltd Private Scheduled Banks
Askari Commercial Bank Limited
Bank Al-Falah Limited Bolan Bank Limited
Faysal Bank Limited Bank
Al-Habib Limited Metropolitan Bank Limited
KASB Commercial Bank Limited
Prime Commercial Bank Limited
PICIC Commercial Bank Limited
Soneri Bank Limited
Private Scheduled Banks

Union Bank Limited

Meezan Bank Limited
Saudi-Pak Commercial Bank Limited
Crescent Commercial Bank Limited
Dawood Bank Limited
NDLC-IFIC Bank Limited

(NIB)Allied Bank of Pakistan Limited

United Bank Limited
Habib Bank Limited
SME Banks
ABN Amro Bank
N.VAlbaraka Islamic Bank
BSC (EC)Americ
Expresss Bank
LimitedBank of Tokyo
Mitsubishi LimitedCitibank N.A
Foreign Banks
Deutsche Bank
A.G.Habib Bank A.G. Zurich
Hongkong & Shanghai Banking Corp Limited
Oman International Bank
S.O.A.G Rupali Bank Limited
Standard Chartered Bank Limited
Investment Banks
Crescent Investment Bank Limited
First International Investment Bank Limited
Atlas Investment Bank Limited
Security Investment Bank Limited
Fidelity Investment Bank Limited
Investment Banks

Prudential Investment Bank Limited

Islamic Investment Bank Limited
Asset Investment Bank Limited
Al-Towfeek Investment Bank Limited
Jahangir Siddiqui Investment Bank Limited

Franklin Investment Bank Limited

Orix Investment Bank (Pak) Limite

State Bank of Pakistan

Core Functions of State Bank of Pakistan
State Bank of Pakistan is the Central Bank of the country. While its
constitution, as originally laid down in the State Bank of Pakistan Order
1948, remained basically unchanged until 1st January 1974 when the
Bank was nationalized, the scope of its functions was conside rably
enla rged. The State Bank of Pakistan Act 1956, with subsequent
amendments, forms the basis of its operations today. Under the State Bank of
Pakistan Order 1948, the Bank was charged with the duty to "regula te
the issue of Bank notes and keeping of rese rves with a view to
securing monetary stability in Pakistan and generally to operate the currency and
credit system of the country to its advantage". The scope of the Banks operations
was consider by widened in the State Bank of Pakistan Act 1956, which required
the Bank to "regulate the monetary and credit system of Pakistan and to foster its
growth in the best
nationali n t e r e s t w i t h a v i e w t o s e c u r i n g m o n e t a r y s t a b i l i t y a n d
f u l l e r u t i l i z a t i o n o f t h e countrys productive resources". Under
financial sector reforms, the State Bank
of P a k i s t a n w a s g r a n t e d a u t o n o m y i n F e b r u a r y 1 9 9 4 . O n 2 1 s t
J a n u a r y , 1 9 9 7 , t h i s autonomy was further strengthened by issuing three
Amendment Ordinances (which were approved by the Parliament
in May, 1997) namely, State Bank of Pakistan Act,1956, Banking Companies
Ordinance, 1962 and Banks Nationalization Act, 1974. The changes in the State
Bank Act gave full and exclusive authority to the State Bank to regulate
the banking sector, to conduct an independent mone tary policy and
to set limit on government borrowings from the State Bank of Pakistan. The
amendments in Banks Nationalization Act abolished the Pakistan
Banking Council (an institution established to look after the a ffa irs
of NCBs) and institutionalized the process of appointment of the Chief
Executives and Boards of the nationalized commercial banks(NCBs) and

development finance institutions (DFIs), with the State Bank having a role in
their appointment and removal. The amendments also increased the
autonomy and accountability of the Chief Executives and the Boards of Directors
of banks and DFIs. Like a Central Bank in any developing country, State Bank of
Pakistan performs both the traditional and developmental functions to
achieve macro-economic goals.

DEVELOPMENTAL ROLE OF STATE BANK

The responsibility of a Central Bank in a developing country

goes well beyond there nugatory duties of managing the
monetary policy in order to achieve the macro - economic
goals. This role covers not only the development of
important components of monetary and capital markets but
also to assist the process of economic growth and promote the
fuller utilization of a countrys resources. Ever since its
establishment, the State Bank of Pak istan, besides
disc harging
its t r a d i t i o n a l f u n c t i o n s o f r e g u l a t i n g m o n e y a n d
c r e d i t , h a s p l a y e d a n a c t i v e developmental role to
promote the realization of macro-economic goals. The
explicit recognition of the promotional role of the Central
Bank evidently stems from a desire to re-orientate all
policies towards the goal of rapid economic growth.
Accordingly, the orthodox central banking functions have
been combined by the State Bank with a well -recognized

developmental role. The scope of Banks operations has

been widened considerably by inc luding the economic
growth objective in its statute under the State Bank of
Pakistan Act
1956.T h e B a n k s p a r t i c i p a t i o n i n t h e d e v e l o p m e n t p r
ocess has been in the form of re h a b i l i t a t i o n o f b a
n k i n g s y s t e m i n P a k i s t a n , d e v e l o p m e n t o f n e w fi
n a n c i a l institutions and debt instruments in order t
o p r o m o t e fi n a n c i a l i n t e r m e d i a t i o n , establishment of
Development Financial Institutions (DFIs), directing the use of
credita c c o r d i n g t o s e l e c t e d d e v e l o p m e n t p r i o r i t i e s , p
r o v i d i n g s u b s i d i s e d c r e d i t , a n d development of the
capital market

kse Market summary of commercial

Banks
Commercial Banks
SYMBOL
Allied Bank SPOT
Apna Microfin.

LDCP
120.57
6.20

OPEN
119.60
6.40

HIGH
121.00
6.40

LOW
118.80
6.20

CURRENT

CHANGE

VOLUME

119.21

-1.36

128,900

6.20

0.00

1,000

Askari Bank
B.O.Punjab
Bank Al-Falah
Bank AL-Habib
Bank Of Khyber
Bankislami Pak.
Faysal Bank
Habib Bank SPOT
Habib Metropol
JS Bank Ltd
KASB Bank Ltd.
MCB Bank Ltd SPOT
Meezan Bank
National Bank.
NIB Bank Limited

22.14

22.10

22.27

22.00

22.22

0.08

856,500
4,644,500

8.76

8.79

8.99

8.66

8.90

0.14

28.90

29.05

29.10

28.66

29.02

0.12

1,067,500
68,000

49.13

49.03

49.79

49.00

49.09

-0.04

9.00

9.49

9.49

8.83

9.14

0.14

11,000

9.94

9.90

10.25

9.80

10.19

0.25

192,000

17.95

17.95

18.00

17.75

17.96

0.01

954,500

214.60

215.90

218.00

213.50

214.53

-0.07

128,800
81,000
36,000

35.77

35.99

36.01

35.55

35.63

-0.14

5.75

5.80

5.80

5.65

5.75

0.00

81,500

1.55

1.59

1.59

1.52

1.56

0.01

280.96

281.00

281.50

278.50

280.57

-0.39

189,000

47.78

47.01

48.00

47.01

47.82

0.04

106,000
2,901,500
3,909,500

60.10

60.39

60.44

59.81

60.06

-0.04

1.96

1.96

2.00

1.93

1.99

0.03

12,000

Samba Bank

7.22

7.20

7.25

7.11

7.25

0.03

SilkBank Limited

2.15

2.14

2.20

2.06

2.09

-0.06

184,000

Soneri Bank Ltd

14.82

14.61

15.60

14.51

15.38

0.56

243,500

St.Chart.Bank

24.00

24.00

24.00

23.75

23.94

-0.06

20,500

Summit Bank

3.08

3.07

3.13

3.01

3.07

-0.01

414,000

196.60

3.18

4,578,900

United Bank

193.42

192.80

197.50

192.80

Pakistans Banking Sector can be classified under the following broad

categories

Categories
Descriptions
State Bank of Pakistan
the Autonomous

Central bank and

And Governing

body for all banking

For all banking
operations in operations
in the country.
Nationalized Schedule Banks

These deal primilary in

industries of banking and capital
market .They offer a
host of unique policies, banking

training
service and product
,which includes
loans, credit cards saving and
consumers banking.
Private Schedule Banks
from depositors to

Banks engage in channeling

To lenders against the primary objective
of acquiring profit i.e . banking spread.

Foreign Banks
international Trade

These concentrate primary on

Finance innovative credit Orientation and

plastic .money
Specialized Banks

These banks are created with specific

interest thus specializing and catering to a
particular sector industry.

Development/ Cooperative/ Investment Banks

investment banks act as
underwriter or agent serving
intermediary between an issuer of securities
and the investing public.

as