Period of 1971 to 1990

As you may be aware, all 14 Pakistani commercial banks were nationalized and merged into
5 banks from January 01, 1974, and the financial landscape of the country changed
significantly. One of the rationales given for nationalization was the fact that private banks
were likely to neglect small borrowers and other priority areas, and it was thought that with
nationalization, the government could direct credit to desired sectors. Consequently, various
steps were taken, which included commencement of subsidized credit schemes, introduction
of a complex system of credit ceilings, and the imposition of controls on interest rates.
The experiment of nationalization, however failed to give the desired results, as political
interference in lending decision and also in the appointment of the boards and chief
executives marred the operations of these banks. The efficiency of the banks was affected
severely, and by the end of 1980s, the banking sector in Pakistan had become unsuitable for
adequately meeting the growing financial needs of the country.