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Banking Industry of Pakistan

In Pakistan all banks & DFI’s work under the

supervision of state bank of Pakistan. There are four
major sectors in which SBP has divided banks

 Corporate sector
 Agriculture
 Consumer sector

SBP provide regulations according to which all banks

should work &continuously keep track that banks are
complying through the regulations or not.

Products/Services in Banking Sector

Some major services in banking industry of Pakistan;

• Current accounts
• Remittance services
• Investment banking
• Running finance
• Online banking
• Telephone banking
• Personal loans
• Credit cards
• Demand draft
• Term accounts
• Traveler checque
• Business loans
• Debit cards
• Mobile banking
• Lockers facility
• Saving account
• Home loans
• Internet banking


Institutional arrangements that provide consumers

with financing support to enhance their consumption
and, as a result thereof, improve their standards of
living, fall within the broad definition of Consumer

‘Consumer financing’ means any financing allowed to

individuals for meeting their personal, family or
household needs. The facilities categorized as
‘Consumer financing’ include

O Credit Cards
O Auto Loans
O Housing Finance
O Personal loans

However, the semantics of financial markets

generally tend to exclude housing finance from this
range treating it as a distinct financing product
essentially because of its long-term nature.
Once upon a time, banking used to be all about
saving and interests. No more, no less… in the
current age of cutthroat competition, it becomes a
prerequisite to success to have a large and
successful portfolio of products and services with
which the banks can woo and then wow their
customers. Here in come offerings such as loans,
credit cards, easy installments and what not. If you
want a BMW in a draw, get a credit card, they say…
or if you want to go to Dubai, get a credit card! It
has been through this concerted thought that the
concept of consumer banking has become so
prevalent in Pakistan.
However, it was not always like this. Not every bank
could offer a credit card and not all of the banks
could offer the services so consistently that do now.
There were but a few multinational banks that
attempted to offer anything remotely resembling
consumer banking. It was at this point that the State
Bank introduced certain reforms, and many national
banks were privatized. At the same time, there was
a paradigm shift with respect to the approach of
many a bank with a huge base of customers in the
urban sector. These banks began to take an
increasingly market oriented approach and became
the forerunners for more than 5 years of growth of
consumer banking in Pakistan.

Products/Services of Consumer
Auto Loans

In Pakistan auto loans are purchase of brand new or

used, imported or local cars for private use. Auto
financing and auto leasing both facilities are offered
by most of the banks. The average market rate for
auto loans is 14-16%

Home Loans

The loans taken for buying, buildings or renovating

of house/land are classified as home loans. For home
loans both variable & fixed rate options are available

Personal Loans

These are generally unsecured type of loans but in

certain cases when the amount of personal loans
increases the normal limit its remaining portion must
be secured.

Credit-Debit Cards
Credit cards allow a customer to make payments on
credit. Initially foreign banks were offering these
cards but now many local banks are also offering
credit cards facility.
Debit cards are issued to the account holder of any
bank in Pakistan almost all the banks are offering
this facility. The amount used by debit card holder is
automatically debited from the account of card

Deposit Accounts

All commercial banks are offering different kinds of

deposit accounts. These accounts range from
customer to customer to fill the need of every type
of customer. Some major categories are:

• Current accounts
• Saving accounts
• Business accounts
• Term deposit accounts
• Foreign currency accounts

Wealth Management

Wealth management service is a new kind of service

introduced in consumer banking now days. It covers
all aspects of securing future of bank's customer. It
includes insurance, tax advisory, financial
consultancy, investment plans etc.

E- Banking
To facilitate its customer all local& foreign banks are
offering high technological e-banking services. Some
of the major banking services provided by the banks

• Phone banking
• Internet banking
• Online banking
• Mobile banking

SBP Prudential Regulations for

Consumer Financing

The state bank of Pakistan has divided the consumer

financing in its prudential regulations into four major
areas which are;

• Credit Cards
• Auto Loans
• Home Loans
• Personal Loans

Auto Loans

The vehicles to be utilized for commercial purposes

shall not be covered under the prudential regulations
for consumer financing
The maximum tenure for the auto loans finance shall
not exceed 7 years.
While allowing auto loans, the banks/DFI shall
ensure the minimum down payment does not fall
below 10% of the value of the vehicle.
The banks/DFI shall ensure vehicle remains properly
insured at all times during the tenure of the loan
The banks/DFI should ensure the good number of
authorized auto dealers is placed at their panel to
eliminate the chances of collusion unethical

Home Loans

Banks/DFI’s shall determine the housing finance

limit, both in urban and rural areas, in accordance
with their internal credit policy, credit worthiness and
loan repayment capacity of the borrowers.
The housing finance facility shall be provided at
maximum debt-equity ratio of 85:15.
Banks/DFI’s are free to extend mortgage loans for
housing, for a period not exceeding 20 years.
The house finance by the bank/DFI shall be
mortgaged in banks/DFI’s favor by way of equitable
or registered mortgage

Personal Loans

The clean limit per person for personal loans will

generally not exceed Rs 500,000.
Banks/DFI’s may assign clean limit beyond Rs
500,000 but not in excess of Rs 2 million to their
prime customers who have extraordinary strong
repayment capacity.
In case where loan has been extended to purchase
some durable goods/items, including personal
computers etc, the same will be hypothecated with
the bank/DFI besides other securities, which the
bank/DFI may require on its own.
In case of running finance, it shall be ensured that at
least 15% of the total utilization of the loan during
the year is cleaned up by the borrower for a
minimum period of 1 week.

Credit Cards

The banks/DFI shall take responsible steps to satisfy

themselves that cardholders have received the
cards, whether personally or by mail.
Banks/DFI’s shall provide the credit card holders, the
statement of account at monthly intervals.
Due date of payment must be specially mentioned on
the account statement.
Maximum unsecured limit under credit card to
borrower shall generally not exceed Rs 500,000.
Banks/DFI’s may also allow financing under the
credit card scheme in excess of Rs 500,000/-(up to
Rs 2 million) to other customers as well, provided
the excess amount is appropriately secured.

Credit Information Bureau

The bureau is a repository of credit information of
borrowers. The member lending institutions provide
credit data of their borrowers to the bureau which
consolidates, updates, and store the same and
provide information to its members.
History of CIB
The CIB is a public sector credit bureau of Pakistan
was established in 1992 by the SBP under section
25(A) of banking company’s ordinance 1962.
Role of CIB
The CIB plays an important role in promoting
financial discipline, better credit risk management
and prudent lending decisions.

Contribution of Consumer Banking in

Economic Development
Lending through credit cards, personal loans, and
auto loans, loans for durable and housing finance
emerged main stream of consumer finance. The
shape domestic demand and lending strategy by the
banking sector in quite subtle ways. Consumer
finance has also brought social change through
higher circular of money and relaxation of income
constrains for borrowing particularly among those
middle class segments that were eager to become
part of growing economy and keen to benefit from
economic growth.
Analysis and Findings

• Challenges
• Problem faced by borrowers
• Problem faced by lenders
• Opportunities

Conclusion and Recommendations


The consumer banking industry has many

opportunities to grow, customer wants convenience
mode of banking for which new products& services
should be introduced.
Wealth management service which is a new service
in Pakistan consumer banking industry .Its
awareness should be increased.
Improper guidance, slow processing and bank
statements are the major problems faced by the
bank’s customer in getting consumer loan. The
reason is that people applying for loan don’t have
proper in formation about the requirements by the
banks and due to high number of application lengthy
procedure by banks loan processing is very slow.
Despite of many changes by the banks in their
policies and strict regulation by SBP still bank's
customers are facing hidden charges problem.