BANKING IN PAKISTAN

BY: ADMIN GROUP 8

SY.BSc - B
Introduction
• Bank Name-State Bank of Pakistan
• Governor-Reza Baqir
• Foreign Reserves- $1158.6 crores
• Bank Rate-13.25%
• Currency-Pakistani Rupee ($1=154.77 Pakistani Rupee)
• Headquarters-Karachi
• Founded- 1st July 1948
Establishment of Banking System
• Acute shortage of resources
• Lack of trained human resource
• The Pre-Nationalized phase of banking
• The Post- Nationalized phase of banking
Nationalization of Bank
• Pakistani Banks were nationalized under the bank (Nationalization)
Act, 1974.
• Equal Distribution of Wealth
• Economic Stability
Initiatives for Islamization of the Banking
Sector
• Steps for Islamization of banking and financial system of Pakistan
were started in 1977-78
• Separate Interest-free counters started operating
• At the end of the 20th century there were many issues which could
not be addressed adequately and therefore the whole concept of
Pan-Islamization fell apart.
Privatization of Banks
• The Government of Pakistan has decided to privatize the public
sector banks because of lack of financial discipline owing to undue
political interference in the financial intermediation process.
• The privatization process initiated in the early 1990s as part of
economic reforms programme.
• Government of Pakistan has divested two banks in 1991 namely
Muslim Commercial Bank and Allied Bank of Pakistan Limited.
Inception of Islamic Banking Practices
• All laws should be in conformity with Shariah (Constitution of
Pakistan)
• Pakistan – First country to declare itself an Islamic Republic in 1956
• Islamic principle of Prohibition of Riba (Interest) in financial activities.
• Religious Beliefs heavily affect the business culture of Pakistan.
• During the late 1970’s Zulfiqar Ali Bhutto hosted the Islamic summit
of Muslim nations.
• It was during this event that Islamic Banking received official support,
and was agreed to be established as Islamic Development bank by the
summit members.
Current Status of Pakistani Banking Sector
• Dual System Of Conventional and Islamic finance
• Islamic banking sector had lack or regulations and standards
• Resulted in developing financial products that were against the
teachings of Islam
• Under this, both conventional banks and Islamic banks could operate
in Pakistan
• A number of Islamic Banks and financial instituions are listed on the
KSE
Interest Rates In Pakistan
• Interest rates averaged at 11.18% from 1992 to 2019
• The SBP increases benchmark interest rate to 13.25% in
September,2019.
• The IMF was approved at USD 6 Billion package for cash-strapped
Pakistan.
 BankIslami Customers Lose Over $6 Million in
Biggest Security Breach in Pakistan’s History
• Date: 27 Oct ,2018
• Major bank affected: BankIslami
• Cyber hacking of data servers by unidentifed group
• International credit card transactions to Usa,Russia and other
countries
• Data over 8000 accounts was sold on Dark-Web of 10 banks
• Bank Islami’s system was down for about 12 hours in a bid to stop
these transactions.
 SBP’s Directives
• “biometrically verified domestic payments on ATM cards”.
• Security measures on all IT systems, including those related to card
operations, are continuously updated to meet any challenges in
the future.
• Resources are deployed to ensure the 24/7 real-time monitoring of
card operation related systems and transactions.
• Immediately coordinate with all the payment schemes, switch
operators and media service providers the banks are integrated with
to identify any malicious activity of suspicious transactions.