Presentation Topic:

Financial Sector of Pakistan

Group Members
Mansoor Elahi M12BBA006
Mubeen Khalid M12BBA031
Muhammad Umer Khan M12BBA033
Hafiz Muhammad Shoaib M12BBA036
 INTRODUCTION:
Global outlook
Ranking of Pakistan
Backbone of economy
Main pillars of financial development
Public Debt
IMPORTANCE:
Banks as a financial intermediary
Credit Provision
Liquidity Provision
Risk Management services
Current economic condition of
Pakistan

Growth and Investment

Capital Market
Inflation
External and Domestic debts
 Role and
Responsibilities of
SBP
Role/ Functions:
Primary Functions
Secondary

Functions
PRIMARY FUNCTION:
Issue of Notes
Bankers Bank
Lender of the last resort
Banker to Government
Conduct of monetary policy
SECONDARY FUNCTIONS:

Agent to the Government

Management of Foreign exchange

 Primary Functions
Issue of Notes:

Sole Authority to issue the notes in the country.

30% should be maintained in the form of Gold
coins/bullion, and approve foreign currency.

SBP has 3 offices of note issue situated at

Karachi, Lahore and Peshawar.
BANKERS BANK:
SBP is the bank of all commercial banks working in Pakistan.

All the Scheduled banks are required to maintain at least

5% of the total demand and time liabilities with the SBP.
Foreign banks working in Pakistan are required to

maintain 7% cash reserves for their demand and time

liabilities.
SBP makes advances and loans to such institutions and

banks which are working for the advancement of

agriculture and industrial sectors.
.Also the SBP can sell, purchase, hold debentures of any

banking company or of any financing corporation which

has been set up for the improvement of any sector of
the economy.
LENDER OF THE LAST RESORT:

SBP acts as the lender of the last resort for the

commercial banks.
When commercial banks are in difficulty and are

short of cash.
SBP rediscount the bills of commercial banks in

the time of interbank clearing (Debit balances)

SBP helps commercial banks in maintaining

their solvency and liquidity.

Banker to the Government:

The SBP is the bank of Federal Govt. and provincial

Govt. It performs the following functions.

SBP floats new loans on the behalf of federal and

provincial governments.
Makes/ Receives Payments for Government.
Advances money to Government
 Continued..

Manages the public debts of the federal &

provincial governments.
It is authorized to sell govt. treasury bills and

prize bonds.
It is responsible for the payment of salaries and

pensions, to govt. employees.

It also advances short term loans to the govt.

by discounting its treasury bills.

Conduct of Monetary Policy:

SBPdetermine the size and rate of growth of

the money supply, which in turn affects interest
rates.

Monetary policy is maintained through actions

such as increasing the interest rate, or
changing the amount of money banks need to
keep in the vault (bank reserves).
 Secondary Functions
Agent to the Government:

SBP is the agent to the government.

It represents government on various economic

issues and monetary matters.

The underwriting of the securities of govt. is also

one of the essential responsibilities of State

Bank of Pakistan.
Management of foreign Exchange:

SBP has the responsibility to take care of foreign

exchange reserves of the country.
It ensures that adequate foreign exchange

reserves are maintained.

Observes the foreign investment in domestic

assets.
It is also responsible for the determination of

exchange rates.
Developmental role of State
Bank
The responsibility of State Bank of Pakistan
in our country goes well beyond the
regulatory duties of managing the monetary
policy in order to achieve the macro-
economic goals.
Responsibilities of State Bank
of Pakistan
REGULATION OF LIQUIDITY

REGULATION AND SUPERVISION

EXCHANGERATE MANAGEMENT AND

BALANCE OF PAYMENTS
REGULATION OF LIQUIDITY

Toregulate the volume and the direction of

flow of credit to different uses and sectors,
the Bank makes use of both direct and
indirect instruments of monetary
management.
 REGULATION AND SUPERVISION

Toregulate and supervise the financial system

to ensure its soundness and stability as well as
to protect the interests of depositors.

Off-site and On-site inspection and supervision.

 EXCHANGE RATE MANAGEMENT AND BALANCE
OF PAYMENTS

The maintenance of external value of the

currency.
To achieve the objective, various exchange

policies have been adopted from time to time

keeping in view the prevailing circumstances.
 Commercial Banking Sector:

WHAT IS A BANK?

WHAT IS COMMERCIAL BANK?

In
WHAT IS ECONOMIC DEVELOPMENT? Pakista
n
 LIST OF NOTABLE BANKS IN
PAKISTAN
1Nationalized scheduled banks
2Specialized banks
3Card issuers
4Commercial banks
5Development Finance Institutions
6Foreign Banks
7Islamic banks
8Microfinance banks
Nationalized scheduled
banks
National Bank of Pakistan
Bank of Khyber
Bank of Punjab
First Women Bank
Sindh Bank
Specialized Banks

Industrial Development Bank

Zarai Taraqiati Bank Limited
 Card issuers
Allied Bank Limited
Askari Bank
Bank Alfalah Limited
Burj Bank(Formerly Dawood Islamic Bank)
Citibank Pakistan
Dubai Islamic Bank
Faysal Bank(Formerly Royal Bank of Scotland
Pakistan)
Habib Bank Limited
JS Bank
Khushhali Bank of Pakistan
MCB Bank Limited
Meezan Bank Limited
Soneri Bank
Standard Chartered Bank Pakistan
Summit Bank(formerly known as Arif Habib Bank
 Commercial banks
Allied Bank Limited
Bank AL Habib
Bank Alfalah
Askari Bank
Barclays Bank Pakistan
First Women Bank
Faysal Bank
Habib Bank Limited
Habib Metropolitan Bank
Habib Bank AG Zurich
JS Bank
KASB BankLtd
MCB Bank Limited
Soneri Bank
Summit Bank
United Bank Limited
Samba Bank Limited
Standard Chartered Pakistan
Development Finance
Institutions
Asian Housing Finance Limited

Foreign Banks
Barclays Bank PLC
Deutsche Bank AG
HSBC Bank Middle East Limited
Industrial and Commercial Bank of China Limite

d
The Bank of Tokyo-Mitsubishi UFJ Limited
Islamic banks

Al Baraka Bank
Bank Islami Pakistan Limited
Burj Bank
Dubai Islamic Bank Pakistan Limited
Meezan Bank Limited
Microfinance banks

Khushhali Bank Limited

NRSP Microfinance Bank
Tameer Microfinance Bank Limited
U Microfinance Bank Limited
 ROLE -OR- IMPORTANCE OF COMMERCIAL
BANKS IN ECONOMIC DEVELOPMENT OF
PAKISTAN:

Capital Accumulation or Formation:

The commercial banks can promote capital formation in the
country by moving the resources to the productive uses. Rate of
capital formation is 5 % in Pakistan.

Mobilization of Savings:
There operates vicious circle of poverty in developing countries
like Pakistan. Banks induce the people to earn interest through
saving and it provides various facilities in a country to create a
will and power to save. Domestic savings are 9.5 % of GDP.
 Continued..
Availability of Funds

The activities like inventions and innovations, research and development

and initiatives (effectiveness in responding to challenges) are impossible due to
insufficiency of funds in these countries.

Banks remove the deficiency of capital by providing different types of

funds that leads to economic development.
Attaining Self Sufficiency

Banks provide incentive for the entrepreneurs to take risks and to use
idleresources for more and better production.
 Continued..
Implementation of Modern Technology:
Commercial banks provide more funds to people to make it possible to use the modern techniques

of production.

Development of Agriculture Sector:

Rural areas and agricultural sector is still backward In Pakistan. Banks are playing an important

role in the development of rural and agriculture sector. A special bank ZTBL has a major role in

development of rural and agriculture sector. Growth rate of agricultural sector is 1.2 %.

Development of Industrial Sector:

Industrial sector is the backbone of economies in rich nations. It is still backward in Pakistan. Some

special industrial development commercial banks i.e., PICIC, IDBP etc. are provided their

remarkable services for the development of industrial sector. Industrial development leads to

agricultural development and it results in economic development. Growth rate of industries is

1.7%.
 Continued..
Expansion of Market:

Banks are helping in the formation of sound economic infrastructure in order to

raise living standards and to expand trade and commerce of an economy.

Research and Development:

Modern techniques are established and these are applied to economy in research

institutes. Due to use of modern techniques of production, better quality and more

quantity is produced which leads to improve the living standard of population.

 Continue
Essential for Foreign Trade
d..
Commercials banks are helpful in increasing international trade through following ways:
i.Provision of credit facilities
ii.Low rate of interest for the exporters
iii.Opening of letter of credit (L/C)
iv.Arrangement of foreign exchange
v.Opening of foreign currency accounts

Remove Budget Deficits

To cover the gap between the expenditures and revenues, government
borrows from the banks. As a result, the development process can be started
through borrowed money from banks. Budget deficit is 5.3 % of GDP.

Optimum Utilization of Resources

Commercial banks provide loans and remove the problem of deficiency of
capital. Due to use of resources in an economy there is increase in production,
income and employment etc. Increase in these things leads to economic
development. Natural resources contribute to GDP just less than 1 %.
Surplus in BOP: Continued..
Creators and Distributors of Money

Provision of Valuable Services

Some of the most important services provided by commercial banks are as under:
i. Due to use of credit instruments like cheques , drafts and bills of exchange, banks have
reduced the use of currency at the cheapest costs and in the safest manner
ii. Banks serve as business and commercial agents of their customers.
iii. Banks provide locker facility.
iv. Banks accept the various utility bills.
v. They guide the investors while making investment decisions.
vi.Banks advance loans for education in foreign countries.

Modern Facilities
Now commercial banks are providing various modern facilities like:
o PC & Internet banking since 2003, PC banking available to all HBL customers in 14 cities.
o ATM & Online facilities & Balance ready cash etc.
o Mobile Banking and Call Centres, Smart Card and Debit Card.
o DD issuance, Statement inquiry and credit cards.
Insurance sector of Pakistan:
Insurance Sector has registered a very slow growth in
the history of Pakistan. Based on our research, the
following conclusions emerge:
Listed insurance sector on Karachi Stock Exchange in

terms of companies is only 4.4%.

Share of listed insurance sector on total listed

companies on Karachi Stock Exchange is only 1.41%.

Out of 637 listed companies, only 29 relate to

insurance sector.
From the birth of Pakistan till now we have added

only 29 listed companies- giving us a ratio of less

than 0.5 per company per year.
Insurance sector of
Pakistan:
Turnover for 10 months on the Karachi Stock
market was only 1.55% of the total turnover.

Share of insurance sector on listed companies on

Karachi Stock Exchange is only 3.83% in respect
of Market Capitalization.

Share of insurance in GDP of Pakistan is only

1.80%. Ten percentage companies shares are
listed below par. Therefore, these are sick. They
need revival.
 Insurance sector of
Pakistan
Business classes of insurance available in
Pakistan.

Health insurance
General insurance
Life insurance

* TheGovernment of Pakistanestablished the Department of Insurance

in April 1948 as a department of theMinistry of Commerce
Insurance sector of
Pakistan:

Share in GDP (24% of the service

sector)
No. of insurance companies.
Major problems in insurance
sector
* Excessive Government controls
* Compulsory reinsurance with PIC
* High capital gains tax on investment gains
* Higher rate of tax on dividend income than
10%
* Inaccessibility to public sector business,
which is the domain of the National Insurance
Corporation
* Poor quality of manpower and limited
training facilities
KeyAreasInWhichTheInsuranceSector
MustThemselvesTakeThe Initiative

Education
Gradually expanding into an urban

economy
Railway system
Industrialisation products coverage
 Constraints

Political instability
Under developed capital market
Govt. & Public debts
Shortcomings in foreign exchange
Foreign loans
 Solutions
By strengthening investment banking
Promotion of banking at the grass roots

level
Strong coordination between monetary and

fiscal authorities
Industrialization
Effective Govt. policies
Rigid taxation system
 Summing up
Inspite of the international economic crisis,
continuing political turmoil and rising
militancy in pakistan, the financial services
sector has held up fairly well in the last year.
Its future, however, remains tied to a
measure political stability in the country that
allows economic activity to occur unhindered.
Lets hope the nations political and ruling
elites can find a way to find a peaceful way
forward.