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. 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 l e v e l p l a y i n g fi e l d s a s
t h e y c a n r a i s e fi n a n c e s o f a l l t y p e s a n d t e n u r e s
f r o m t h e domestic banking system
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. Thesector 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 bankingsystem. Attracting
foreign investment and winning profitable customers are the

onlyoptions 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 experiencedgrowth rates of 21% and 36%
in its deposit and advances portfolio respectively, whichin turn,
has increased the banks stability as compared to the preceding
year.

Categorical Listing of Operating Banks

Central Bank

Nationalized Scheduled
Banks

State Bank of Pakistan

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)American 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.GRupali 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, asoriginally laid down in the State Bank of Pakistan Order
1948, remained basicallyunchanged until 1st January 1974 when the Bank
was nationalized, the scope of itsfunctions 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 reserves with a view to securing monetary
stability in Pakistan and generally to operate the currency and credit systemof the
country to its advantage". The scope of the Banks operations was
considerablywidened in the State Bank of Pakistan Act 1956, which required the
Bank to "regulatethe 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 (whichwere approved by the Parliament
in May, 1997) namely, State Bank of Pakistan Act,1956, Banking Companies
Ordinance, 1962 and Banks Nationalization Act, 1974. Thechanges in the State
Bank Act gave full and exclusive authority to the State Bank to regula te
the banking sector, to conduct an independent mone tary policy and

to setlimit on government borrowings from the State Bank of Pakistan. The

amendments inBanks Nationalisation Act abolished the Pakistan
Banking Council (an institutionestablished to look after the a ffairs
of NCBs) and institutionalised the process of appointment of the Chief
Executives and Boards of the nationalised commercial banks(NCBs) and
development finance institutions (DFIs), with the Sate Bank having a rolein their
appointment and removal. The amendments also increased the autonomy
andaccountability 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 boththe traditional and developmental functions to achieve
macro-economic goals. Thetraditional functions, which are generally
performed by central banks almost all over the world, may be classified into
two groups: (a) the primary functions including issueof notes, regulation and
supervision of the financial system, bankers bank, lender of the last
resort, banker to Government, and conduct of monetary policy, and (b)
thesecondary functions including the agency functions like management
of public
debt,m a n a g e m e n t o f f o r e i g n e x c h a n g e , e t c . , a n d o t h e r f u n c t i o n
s l i k e a d v i s i n g t h e government on policy matters and maintaining
close relationships with internationalfinancial institutions. The nontraditional or promotional functions, performed by
theSta te Bank include development of financial fra mework, institut
iona lisation of savings and investment, provision of training facilities to
bankers, and provision of credit to priority sectors. The State Bank also
has been playing an active part in the process of islamization of the banking
system. The main functions and responsibilitiesof the State Bank can be broadly
categorised as under

DEVELOPMENTAL ROLE OF STATE BANK

The responsibility of a Central Bank in a developing country

goes well beyond theregulatory duties of managing the
monetary policy in order to achieve the macro - economic
goals. This role covers not only the development of
important componentsof monetary and capital markets but also
to assist the process of economic growth and promote the fuller
utilisation 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 realisation of macro-economic goals. The
explicitrecognition of the promotional role of the Central
Bank evidently stems from a desireto 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 awell-recognised
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.
Askari Bank

LDCP
120.57

OPEN
119.60

HIGH
121.00

LOW
118.80

CURRENT

CHANGE

VOLUME

119.21

-1.36

1,000

128,900

6.20

6.40

6.40

6.20

6.20

0.00

22.14

22.10

22.27

22.00

22.22

0.08

856,500

8.76

8.79

8.99

8.66

8.90

0.14

4,644,500

Bank Al-Falah

28.90

29.05

29.10

28.66

29.02

0.12

1,067,500

Bank AL-Habib

49.13

49.03

49.79

49.00

49.09

-0.04

68,000
11,000

B.O.Punjab

Bank Of Khyber

9.00

9.49

9.49

8.83

9.14

0.14

Bankislami Pak.

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

35.77

35.99

36.01

35.55

35.63

-0.14

81,000
36,000

Faysal Bank
Habib Bank SPOT
Habib Metropol
JS Bank Ltd

5.75

5.80

5.80

5.65

5.75

0.00

KASB Bank Ltd.

1.55

1.59

1.59

1.52

1.56

0.01

81,500
189,000

MCB Bank Ltd SPOT

Meezan Bank

280.96

281.00

281.50

278.50

280.57

-0.39

47.78

47.01

48.00

47.01

47.82

0.04

106,000
2,901,500

60.10

60.39

60.44

59.81

60.06

-0.04

NIB Bank Limited

1.96

1.96

2.00

1.93

1.99

0.03

3,909,500

Samba Bank

7.22

7.20

7.25

7.11

7.25

0.03

12,000
184,000
243,500

National Bank.

SilkBank Limited
Soneri Bank Ltd

2.15

2.14

2.20

2.06

2.09

-0.06

14.82

14.61

15.60

14.51

15.38

0.56

20,500

St.Chart.Bank

24.00

24.00

24.00

23.75

23.94

-0.06

Summit Bank

3.08

3.07

3.13

3.01

3.07

-0.01

414,000

193.42

192.80

197.50

192.80

196.60

3.18

4,578,900

United Bank

Pakistans Banking Sector can be classified under the following broad

categories

Categories
Descriptions
State Bank of Pakistan
the Autonomous

Centreal bank and

And Governing

body for all banking

For all banking
operations in opreations
I

Nationalized Schedule Banks

in the country.
These deal primilary in
industries of banking and capital
market .They offer a

host of unique policies, banking

trannig
service and
product,which includes
loans,credit cards saveing and
consumers banking.
Private Sechdule Banks
depositors to

Banks engage in channeling from

To lenders against the primery 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
as
intermediary between an issuer of securities
and the investing public.