Professional Documents
Culture Documents
Pakistan
Banks play an important role in the economic development of a country. It the banking system is
unorganized and inefficient, it creates maladjustments and impediments in the process of development. In
Pakistan, the banking system is very well organized. The State Bank of Pakistan established on July 1,
1948 stands at the apex and is responsible for the operation of the banking system in Pakistan. The other
banks which form the banking structure in Pakistan are playing an active role in the economic
development of the Country.
The role of the commercial banks in the growth and development of sound and healthy economy of the
country is briefly discussed as under:
1.Saving mobilization. The commercial banks namely National Bank of Pakistan, Habib Bank, Allied
Bank, United Bank and Muslim Commercial Bank have opened up branches in urban and rural areas to
mobilize savings of the people.
2. Financing development project. The banks and other development finance institutions like IDBP,
Zarai Taraqiati Bank Limited, PICIC etc. advance short and medium term loans for financing of the
development projects both in the private and public sectors and thus help in accelerating the rate of
economic development in the country.
3. Facilitating trade activities. The credit institutions collect the savings of the people arid make them
available for facilitating trade activities both inside and outside the country.
4. Creating climate for capital formation. A developed banking system is a stimulant to growth and is
creating favourable climate for capital formation in the country.
5. Helping SBP in achieving monetary policies. The commercial banks under the supervision and
guidance of the State Bank of Pakistan help in implementing and achieving the objectives of the monetary
policy which vary from time to time.
6. Assisting in the development. The commercial banks are profit seeking enterprises. In order to
maximize the profits, they have the incentive to maximize the loans. An organized banking system keeps
a balance between liquidity and profitability and thus assists in the planned development of the economy.
7. Provision of agency services. The commercial banks provide agency services to the clients. They
receive and pay cheques. They collect dividends and pay interest and premium on behalf of the clients.
They keep their valuables in safe custody. They help in the mobility of capital and thus stimulate capital in
the country.
8. Making capital available for investment. The organized banking system helps in directing physical
resources into productive channels. It also keeps a balance between the availability and requirements of
the capital in the country.
9. Less reliance on foreign capital. A planned banking system by launching a vigorous campaign of
mobilizing idle saving in the country can meet the capital development requirements from within the
country. The country will thus have to rely less on foreign capital for financing the development projects.
10. Profit, sharing scheme. The commercial banks receive surplus balances of households and
business and pay interest on the deposits of the clients. The banks have now introduced interest free
banking in Pakistan. The depositors instead of having a fixed return on the deposits will share in the profit
and loss of the banks. The Profit and Loss Sharing (PLS) arrangement which is an alternative to interest
under an Islamic Economic System is now operating in Pakistan.
11. Provision of Qarze Hasna. Qarz-e-Hasna Scheme has been prepared and launched by Pakistan
Banking Council through nationalized commercial banks. Under the Qarz-e-Hasria Scheme, financial
assistance is provided to the students of in sufficient means and of outstanding calibre who are unable to
pursue their studies due to financial difficulties. Loans are provided for pursuing studies both Within and
outside Pakistan.
12. Export promotion cell. In order to boost the exports of the country, the banks have established
Export Promotion Cell for the information and guidance of the exporters