No country can progress without a sound and wellmanaged banking system. National economic development and development of banking go hand in hand. The role of banking is all the more important in a newly founded country like Pakistan. Banking is the barometer that reflects the actual economic situation in the country. Industries, commerce and trade, all draw their life blood – Capital from the banking system in the country.
At the time of partition in 1947, the country had no banks except the branch of Central Bank of India in Karachi and Habib Bank. The Central Bank – State Bank of Pakistan was founded in 1948. Now there are half dozen commercial banks with hundreds of branches all over the country. The SBP controls their functions. There are also 16 foreign banks operating in the country. Pakistan has made great economic and industrial progress during last 45 years. The role of our banking system has been praise-worthy in this respect.
The low standard of living of the masses, high rate of population growth, unemployment problem, lack of social amenities called for quick, planned development. It required large capital and investments. It was impossible without the mobilization of domestic funds, saving and investment. The banks played a wonderful role in capital formation. Development of Money Market and Development of Banking System are the same.
Distribution of these investable funds among the various productive sectors of the economy, is the main function of the banks. Nobody can deny the role of banking in capital formation and investment. Our banking system has played a crucial role in the rehabilitation, strengthening and broadening the financial base of the country, as well in the development of the national economy.
Various Banking Institutions – Commercial banks, Agricultural and Co-operatives banks and investment banking have put the country on road to quick progress in Industrial and Agricultural sectors, Expansion of money supply, bank credit by the banks and other Agencies (PICIC, IDBP, NIT, NDFS, ADBP, SBFC, ETC.) have mainly determined the economic progress of the country during last 45 years.
Capital is to Industry what air is to life. The whole Banking System has geared itself to raise capital through saving and investment and to supply funds through credit and loans to needy industrialists. The Agriculture and C-operative banks have provided necessary blood transfusion to the Agricultural sector and small producers. In fact, it has provided a respectable living to the nation. The greatest merit of the system is its adaptability to the changing demands of the time and needs and requirements of the society.
The present Banking scandals pin-point to the mismanagement and corruption in the system. A big list of the politicians and big capitalists as defaulters is shocking. The high bank officials are guilty of giving loan and taking loans for personal luxuries and private business. It is the bad blot on the system.