Professional Documents
Culture Documents
Human left the need of bank when they used the money as a medium of exchange.
Definition of bank:
“A financial institution which deals with money and credit, it accepts deposits from
individuals, firms and companies, give them low interest rate on it while it charges high
interest rate that needs the credit.”
Before independence:
Most of the banking business was in the hands of Hindus of British people and
only two banks were in the hands of Muslims and one bank was already in Pakistan.
There were 19 non-Indian foreign banks in Pakistan before independence whose policies
and operations were controlled by their head offices abroad. These banks were engaged in
export of crops from Pakistan.
Established just few months before independence
Habib bank was established in early 1947 in Bombay(India), shifted in Pakistan
after independence
Muslim commercial bank was established in July 1947, in Calcutta (India),
shifted in Pakistan after independence.
Australian Bank renamed Allied bank in 1942 lahore (Pakistan)
After independence:
3) Various phases of banking sector in Pakistan
Phase-1 1947 to 1974 Establishment of commercial banking system
Phase-2 1974-79 Nationalization of banks
Phase-3 1979-91 Islamisation process
Phase-4 1991-2000 Deregulation process
3.1 Phase-1 1947 to 1974 Establishment of commercial banking system:
1
This was the first phase of developments of Pakistan’s commercial
banking system. In subcontinent, Reserve bank of India was central bank. The bank of
India closed down most of its offices in Pakistan, which had been working as the agent of
Reserve Bank of India was not willing to purchase even token amounts of the government
of Pakistan. Securities and Indian reserve bank’s issued notes were not marketable
declared by India government. The Reserve Bank of India was hardly of any help. It
refused to help the govt. of Pakistan so salaries and other obligations did not fulfill.
After independence of Pakistan 1947,On December 1948 British government decide to
divide the reserves of India central bank 30 percent reserves for Pakistan and 70 percent
reserves for India. After taking this reserve
In May 1948 “Muhammad Ali Jinnah” immediately establish “state bank of
Pakistan”.
After one year in November 1949, national bank of Pakistan was established in
Dacca (East Pakistan). The main purpose was to act as an agent of state bank of
Pakistan.
Numbers of more banks were established according to the need of a country with passage
of time.
3.2 Phase-2 1974-79 Nationalization of banks
In Bhutto government nationalized the banking system. Thus through
the Nationalization Bank Act 1974, SBP and all commercial banks in Pakistan and
carrying on business in or outside the country were brought under the government
ownership with effect from January 1974. The ownership and management of all Pakistan
banks stood transferred and rested in the federal government. The chairman, director and
chief executive of various banks were removed from their offices other than those
appointed by the federal government and the state bank.
At the time of Nationalization, there were following 14 Pakistani commercial banks with
3323 offices allover Pakistan and 74 offices in foreign countries:
1. National banks of Pakistan 2. Habib bank limited
3. Habib bank (overseas) limited 4. United bank limited
5. Muslim commercial bank limited 6.Commerce bank limited
7. Standard bank limited 8.Australia bank limited
2
9. Bank of Bahawalpur limited 10. Premium bank limited
11. Pak Bank limited 12. Sarhad bank limited
13. Lahore commercial limited 14.Punjab provincial co-operative bank limited
A Pakistani banking counsel was established for nationalized
commercial banks to co-ordinate their activities. The Pakistan banking council prepared a
scheme for the recognition of banks. This scheme was notified in 1974, according to it
small banks combined with big banks so these five banks or units were established:
1. National bank limited
2. Habib bank limited
3. United bank limited
4. Muslim commercial bank limited
5. Allied bank of Pakistan limited
In 30th June, 1974. The bank Bahawalpur was merged with the National Bank of
Pakistan. The premier Bank Limited merged with Muslim Commercial Bank
limited and Sarhad Bank Limited , Pak bank limited merged with Australia bank
limited (Allied Bank of Pakistan limited)
In 31st Dec.1974, the commerce bank limited merged with the United Bank
limited.
In 30th June, 1975 when the standard bank limited was merged with Habib Bank
limited.
b) Causes of nationalization:
Distribute equal amount of wealth b/w peoples of country
To remove unhealthy competition among banks it was thought they created
financial and economic problems
c) Result of nationalization:
Although there are doubts about the positive results of the nationalization but
we can say that
The banking facilities expanded in the rural areas.
Bank deposits rose very substantially during a period
Emphasized lending policies, national building projects, discouraged non-
productive and unhealthy activities like hoarding.
3
increase in the number of foreign branches of Pakistani banks
4
17. Soneri Bank Limited (1992) 18. Standard Chartered Bank (Pakistan) Limited
(2006)
19. Summit Bank Limited (Formerly Arif Habib Bank Limited)
5
More competition b/w banks they are trying to provide more bank services that’s
why nation become much satisfied…….etc