DEDICATION

I dedicate this research work exclusively to my parents, whose support, cooperation

and help enables me to achieve this position. They supported me throughout my
career. Their support and help encourages me which resulted in the completion of my
MBA as well as in the completion of this Thesis.

I also want to dedicate this thesis to my honorable teachers, who are highly well-
informed, extremely diligent, supportive, and their encouragement and guidance helps
me to complete my education and thesis.

I owe a special pledge to our project leader, Mr.Raza H. Syed who generated in me
the strength to do this research work and also provided me with necessary supervision
and encouragement.

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 ACKNOWLEDGMENT

First of all I would like to thanks ALMIGHTY ALLAH the most beneficent and
merciful, who gave me the strength and self-belief to get done this project.

I would like to convey my special thanks to the following people for extending their
unconditional support on the project.

I would like to thank the Project Coordinator of Bahria Institute of Management And
Computer Sciences (BIMCS) for his guidance. I would like to express gratitude to my
advisor and Teachers MR. Kaleem Ghais and Madam Shumaila Rafique for their
support, time consuming efforts in directing me and guidance they gave through out
my thesis.

Last but not the least I would like to thank my parents specially my mother, who
supported me throughout my career. Without their help and support, the completion of
my study would never have been a reality.

ABSTRACT

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This study analyzes and compares the existing status of liquidity in both the public
and the private banks. It also covers the information about whether the Pakistan’s
banking industry is facing liquidity crises. This study also highlights various sources
of funds available to banks in case of liquidity shortages.

This research is based on “A Comparison of Impact of Funding Liquidity Crisis

between Public Bank (National Bank of Pakistan) and Private Bank (Bank Alfalah
Limited) in Pakistan.”

This research is an attempt to find out is the funding liquidity crises present in
Pakistan, whether these crises have affected the Pakistan’s banking sector and also
what are the policies implemented so far in order to prevent Pakistan’s banking sector
from being hurt from the liquidity crises.

This research is basically exploratory in nature and conducted in natural non-

contrived setting aimed at gathering maximum information. This research is mainly
based on secondary data to fulfill the requirement of this project.

The data is also collected from websites, newspapers and financial magazines which
is very helpful in preparing this research study.

This research study is able to find out that the Private sector banks have faced the
liquidity crisis as compare to public sector bank. The main factors that both the public
and the private banks consider for the liquidity crisis are DEPOSIT
MOBILIZATION, INFLATIONARY PRESSURES and most impotantly
ECONOMIC SLUMP. Both public and private sector bank give due consideration to
liquidity risk management.

Both the public bank and the private bank have well diversified range of sources for
funds including BORROWING , REPO , INVESTMENT IN MONEY MARKETS ,
ISSUANCE OF CORPORATE LOANS , DEPOSITS & SUBORDINATE DEBT
and specially the role os SBP is very supportive for the banking industry which does
not allow the banking industry to face any liquidity crises. The role of the SBP is also
very helpful in this regard that it mold its policies e.g. reduction in CRR,SLR and

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exemption of time deposits in favor of the banks which helps banks not to face the
severe liquidity problems.

This study also concludes that Pakistan’s banking sector both public and the private
banks are not facing liquidity problem due to many alternatives available with them
specially the support of SBP.

Despite the fact that Pakistan’s banking sector is not facing liquidity crises, after
conducting the study and analyzing the factors and the data few suggestions are there,
that will help the banking sector in minimizing the liquidity problems whenever faced
in future. Identifying the sources of potential cash demands and cash supplies,
Develop models to quantify the risk of unknown cash demands, Assess the company’s
ability to sustain extreme cash requirements, and if necessary, secure additional
liquidity or contingent financing sources to protect against financial distress.

TABLE of CONTENTS

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1 PROBLEM AND ITS BACKGROUND……………………………………..1

1.1 Introduction…………………………………………………………………….1

1.1.1 Introduction of the

Topic…………………………………………...1

1.1.2 Evolution of the Financial

Crises……………………………….......2

1.1.3 Present
Status………………………………………………….........7

1.2 Statement of the

Problem……………………………………………………….9

1.3 Significance of the Study………………………………………………….........9

1.4 Scope……………………………………………………………………….......10

1.5 Delimitations…………………………………………………………………...10

1.6 Definitions……………………………………………………………………..10

2 RESEARCH METHODOLOGY & PROCEDURES………………..…....13

2.1 Research Design……………………………………………………………….13

2.1.1 Nature of the

Study………………………………………………...13

2.1.2 Study Setting……………………………………………………...13

2.1.3 Time Horizon……………………………………………………...13

2.2 Research Methods……………………………………………………………..13

2.3 Respondents of the Study………………………………………………….….14

2.4 Instruments……………………………………………………………….……14

2.5 Treatment of the Data…………………………………………………..……..14

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2.6 Presentation Analysis…………………………………………………..………15

2.7 Hypothesis……………………………………………………………...………15

3 LITERATURE REVIEW………………………………………………….16

3.1 FOREIGN LITERATURE REVIEW………………………………...……..16

3.1.1 Liquidity Risk and the Current

Crisis……………………………16

3.1.2 The Blunders That Led To the Banking Crisis…………..

………18

3.2 LOCAL LITERATURE REVIEW……………………………...………….20

3.2.1 SBP Moves to End Liquidity Crunch……………….

…………...20

3.2.2 Banking Sector May Face Severe Liquidity

Crunch……….........22

3.3 Gaps to Be Bridged By the Study…………………………………………..24

4 PRESENTATION ANALYSES…………………………………….…....25

4.1 testing Hypothesis…………………………………………………………...68

5 CLOSING UP……………………………………………………………...72

5.1 Summary of the Findings……………………………………………………72

5.2 Conclusion…………………………………………………………………
..74

5.3 Recommendations…………………………………………………………..75

6 BIBLIOGRAPHY………………………………………………………....76

ANNEXURE

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