GROUP MEMBERS:

1. SAMEIA FARHAT2. SAIMA KAUSAR 3. SEHAR IFTIKHAR4. ANDLEEB ZARA5. ZAMZAM FATIMA

UNIVERSITY OF EDUCATION, BANK ROAD LAHORE

DEPARTMENT:

BBA (Hon’s) – 8th Semester

COMMERCIAL BANKS IN PAKISTAN

CONTENTSIntroductionHistoryThreatsRoles of commercial banksFunction of commercial banksCommercial bank services

INTRODUCTION The financial sector in Pakistan consist of

commercial banks, development finance institutions, micro finance banks, non bank finance companies, modarba, stock exchange and insurance companies.

Providing banking services to individuals, small businesses and large organizations.

INTRODUCTION An institution which accepts deposits, make

business loans and offer related services. The structure of banking sector in Pakistan

underwent significant changes after 1997 when the banking supervision process was aligned with international best practices.

Privatization of public sector banks and the ongoing process of merger/consolidation brought visible changes in the ownership, structure, and concentration in the banking sector.

HISTORY IN PAKISTAN

HUMBLE BEGINNINGS, 1947 – 1970

For nearly a year after partition, Pakistan had no central bank. Habib Bank – established in 1941 – filled this gap initially, until the State Bank of Pakistan (SBP) was set up in 1948 under quasi-government ownership.

The role of domestic banks was particularly limited at the time.

A LEGACY OF PUBLIC CONTROL, 1970 – 1980

Under the nationalization policy thirteen banks were brought under full government control, and consolidated into six nationalized banks.

These measures were meant to improve lending to prioritized industries.

BUSINESS AS USUAL, 1980-1990

Over time, the financial sector grew to serve primarily large corporate business, politicians and the government.  Board of Directors and CEOs were not independently appointed.

Banks were essentially not in control of their destinies during this period.

PRIVATIZATION, 1990 – 1997

By 1991, the Bank Nationalization Act was amended, and 23 banks were established – of which ten were domestically licensed. Muslim Commercial Bank was privatized in 1991 and the majority ownership of Allied Bank was transferred to its management by 1993.

More importantly, administered interest rates were streamlined and a system of auctioning government securities was established.

USHERING IN THE REFORMS, 1997 – 2006

Legal impediments and delays in recovery of bad loans were streamlined in 2001.

Lending to small and medium enterprise had previously been neglected, whereas consumer and mortgage finance had not developed prior to reforms.

THE POST-REFORM ERA, 2006 – PRESENT

Buoyed by the spirit of liberalization, the sector’s landscape has changed significantly. By 2010, there were five public commercial banks, 25 domestic private banks, six foreign banks and four specialized banks.

There are now 9,348 bank branches spread throughout the country.

Multipronged reforms. Freezing of foreign currency accounts. Continued stagnation in economic activities. Low Growth Accountability and loan recovery.

THREATS FOR COMMERCIAL BANKS

CATEGORIES OF COMMERCIAL BANKS IN PAKISTAN

Commercial banks operating in Pakistan can be divided into four categories:

1. Nationalized Commercial Banks (NCBs).2. Privatized Banks.3. Public Banks.4. Foreign Banks.

LIST OF COMMERCIAL BANKS OPERATING IN PAKISTAN

Allied Bank Limited Askari Bank Bank Alfalah Bank AL Habib Barclays Bank Pakistan Citibank Pakistan Faysal Bank First Women Bank Habib Bank Limited Habib Metropolitan Bank Habib Bank AG Zurich HSBC Pakistan JS Bank

KASB Bank Ltd MCB Bank Limited MyBank National bank of Pakistan NIB Bank Pakistan Royal Bank of Scotland

Pakistan Standard Chartered

Bank Pakistan Silkbank Limited Soneri Bank Summit Bank United Bank Limited

ROLE OF COMMERCIAL BANKS Processing of payments through

EFTPOS, Internet Banking and many other means.

Issuing bank drafts and bank cheques. Accepting money on term deposit. Lending money by overdrafts. Providing documentary and standby L/C,

guarantees and other form of off-balance sheet activities.

Cash management and treasury.

CONTINUE… Safekeeping of documents & other items in

safe deposit boxes. Sales, distribution or brokerage, with or

without advice. Merchant banking and private equity

financing. Today large commercial banks usually have

an Investment Bank arm, which underwrite bonds, and make markets in currency, interest rates, and credit-related securities

COMMERCIAL BANK FUNCTIONS

The functions of commercial bank can be classified as follows:

1. Primary Functions2. Secondary Functions3. Development Functions

I. PRIMARY FUNCTIONS:

The basis of Commercial Bank operations. Central in Nature. Core of the whole operations of Bank.

Primary functions include: 1. Accepting Deposits2. Giving Loans

1. ACCEPTING DEPOSITS

(a) Demand Deposits or Current Accounts: Repayable on demand No interest is paid on them A little commission is charged Small interest is paid to the people who

keep large balances.

(b) Fixed Deposits or Time Deposits: Can only be withdrawn after the expiry

of the period. Higher interest is paid

(c) Savings Bank Deposits: Midway between current and fixed

accounts. The rate of interest is less than on fixed

deposits.

2-GIVING LOANS Receiving of deposits is not all about a

bank’s function. A bank pay interest after collecting money, a

bank invests it or lends it out. Money is usually lent to businessmen or

traders for short periods because the bank must prepare to meet the demand of the depositors who have deposited for short periods.

WAYS OF MONEY ADVANCEMENT BY BANKS

Some ways of money advancement are as follows:

(a) By allowing an Overdraft (b) By Creating a Deposit(c) Discounting Bills

WAYS OF MONEY ADVANCEMENT BY BANKS(a) By allowing an Overdraft: Customers have right to over-draw their

accounts means they can get more than they have deposited.

The over draft amount varies with the financial position of the borrower.

WAYS OF MONEY ADVANCEMENT BY BANKS(b) By Creating a Deposit: Cash-credit is a way of lending by which a

person wants a loan from bank, he has to satisfy the manager about his

1)Ability to repay 2)The soundness of his venture 3)His honesty of purpose. Bank require a tangible security, or

satisfaction of borrower’s personal security.

WAYS OF MONEY ADVANCEMENT BY BANKS(b) By Creating a Deposit: The details of time and rate of interest are

settled and the loan is advanced and when time completes the borrower with interest give amount back to the bank and thus bank make profit by giving loans.

WAYS OF MONEY ADVANCEMENT BY BANKS

(c) Discounting Bills: A way in which banks purchases these bills

through bill brokers and discount them to companies or directly to the merchants.

Investment in bills is quite safe and liquid asset.

2-SECONDARY FUNCTIONS:

The secondary functions can be classified as follows: A. Agency functions B. General Utility services C. Miscellaneous / Other

A. AGENCY FUNCTIONS

“The bank performs different functions for their clients and while doing so they act as an agent of their clients. Such functions are called Agency functions” Agency functions are as follows:

1.Collection of Dividends: Banks act as a agent for their clients collect

dividends and interest on stocks and shares. Bank charges small commission against such

services.

A. AGENCY FUNCTIONS

2. Collection of Cheques: Commercial banks while collecting and

making payments of bills, cheques etc act as an agent of its clients.

3. Obeying Standing Instructions: Sometimes clients order the bank to make

payments like subscription fees of clubs or journals, annual membership fees etc.

The bank charges a minute amount for the execution of such instructions.

A. AGENCY FUNCTIONS

4. Selling & Purchasing Securities: Commercial bank sometimes purchase or

sells securities or shares on behalf of its clients.

5. Executor or Trustee: A client may direct his bank to act as an

executor or trustee in dealing or setting disputes with other business parties.

Bank provide technical knowledge or assistance on certain particular matters and charges a small fee for this.

A. AGENCY FUNCTIONS

6. Funds Transfers: Commercial banks can transfer funds from

one banks or branch to another this gives ease to clients, and increases the liquidity of money deposited.

A client can use his cheque book even at any bank.

7. Agent Representative: A commercial bank is also a representative of

his client as required by the circumstances or in dealing with other banks or financial institutions.

B. GENERAL UTILITY SERVICES 1. Providing Lockers2. Issuance of Credit Instruments3. Providing Trade Information’s4. Underwriting Services5. Financing Foreign Trade6. Export Promotion Cells:

.

Zakat Collection Collection of Utility Bills Encashment Services Guarantee, Indemnity Business Safe Custody Advice of Financial Letters

C. MISCELLANEOUS FUNCTIONS

Commercial banks today are the biggest financial intermediary. It is in these commercial banks that most of the nation’s deposits are housed.

In the present day economics, Commercial banks while standing close to central banks play their role in achieving the economic targets set by the government.

They help the state bank in order to implement effectively the desired monetary and fiscal policy.

III. ROLE IN ECONOMIC DEVELOPMENT (DEVELOPMENT FUNCTION)

COMMERCIAL BANK SERVICES

ALLIED BANK LTD It was established in Lahore in 1942

It is largest bank in Pakistan with 700 branches

Bank provides different services like Hajj Services, Utility Bills,Lockers,Remittances,1-Link ATM, Business Account, Foreign Currency Account

ASKARI BANK LTD

Establish on October 9, 1991, as a public limited company.

Starts its operations on April 1 1992 Askari Bank Limited has 222 branches in

Pakistan. The bank provide Islamic, agricultural,

cooperate and investment services

BANK ALFALAH LTD Bank Alfalah was incorporated on June 21,

1997 Its banking operations commenced from

November 1, 1997 They offer services through a network of 471

branches and 388 state of the art ATMs. 

BANK ALHABIB LTD

Run by Dawood habib family group of companies

the bank has a network of 401 Branches (Inclusive of Sub Branches) & three offshore Banking Units in Bahrain, Turkey and EPZ.

Its third largest ATM provider service in Pakistan

Bank AL Habib Limited in affiliation with the Arab Financial Services offers two types of MasterCard.

FAYSAL BANK LIMITED  

Faysal Bank started operations in Pakistan in 1987, In 1995 it starts as a locally incorporated Pakistani bank under the present name of Faysal Bank Limited.

FBL’s footprint now spreads over more than 260 branches in over 70 cities, with combined business assets of over PKR 300 billion. 

HABIB BANK LIMITED 

It was establish in 1941 After independence it moved its office in

Karachi. HBL has grown its branch network and

become the largest private sector bank with over 1,450 branches across the country. 

Habib Metropolitan Bank Limited Habib Metropolitan Bank Limited is a private

bank operating in all major cities of Pakistan Its primary focus on retail banking andtrade

finance. 

JS Bank Limited Presently JS Bank has laid its footprint across metropolises of Pakistan with plans to expand its outreach with more branches nationwide this year. 

MCB Bank Limited largest private sector bank in Pakistan.

In 1974, MCB was nationalized along with all other private sector banks.

. MCB is serving through a domestic network of over 1,193 branches and 688 ATMs across Pakistan.

SAMBA Bank Limited The bank has a network of twenty eight (28)

branches, in Karachi, Lahore, Islamabad and Peshawar

It basically provide services of Islamic banking

SILKBANK Limited SILKBANK Limited has a network of 85

branches in 32 cities across Pakistan