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Public Sector Banks have dominated the financial sector since the
nationalization of the Banks in the 1970s, have experienced
serious deterioration in their loan portfolios mainly because of
political interference in their lending and loan recovery decisions.
About 90% of the defaulted loans and bad debt concentrated
among a small number of influential people.
Causes:
Low Salaries
Pakistan saw the entry of drug money in the early 80s inducing
corruption and strengthening the underground economy.
e) Foreign Aid and Investment
The utilization of foreign funds was not properly perceived. The
public sector utilization of foreign funding was not done prudently
thus scaring away investments as well as tying up the country in
heavy foreign debts.