INTRODUCTIONFinancial Sector Financial Sector in Pakistan possesses a wide spectrum of financial institutions -Commercialbanks,specializedbanks,nationalsavingsschemes,insurancecompanies,developmentfinanceinstitutions,investmentbanks,stockexchanges, corporatebrokeragehouses,leasingcompanies,discounthouses,micro-finance institutions andIslamicbanks.They offer awhole range ofproducts and servicesboth on the assets and liabilities side. Financial deepening has intensified during the last several years but the commercial banks are by far the predominant players accounting for 90 percent of the total financial assets of the systemAmong the commercial banks, 12 foreign and 20 domestic banks together hold 80Percent of the banking system assets - a feat that is unparalleled among developing countries.Foreign banks enjoy the same facilities and same access as the domesticbanks and there isno preferential treatment for domesticinstitutions.Banks:Banks are financial intermediaries. The role of a financial intermediary is to sell its own obligations and to buy the obligations of others. By endowing its obligations with attractive features, an intermediary can sell itsobligations ata higher price thanit has to pay for the obligations it buys. Or to say the same thing in a different fashion, it can market its obligations at a lower interest rate than it can command the obligations itbuys. The spread between the interest rate it pays on its own obligations and the one itreceivesontheobligationsofotherexpensesofdoingbusinessmustthenbededucted. The net profit after these other deductions represents the return to the shareholders for their participation in the activity of a financial intermediary.Central Bank:A central bank is responsible for the monetary policy of the country in which it operates. 'Central bank is an institution which is responsible for safeguarding the financial stability ofthe country. Itholds the ultimate reserves ofthe nation, controls the flow of purchasing power, whether in form of credit or currency and it acts asbankers to the statePAKISTAN BANKING OVERVIEW PAKISTAN BANKING SECTOR-PAKISTAN FINANCIAL HUBThe Banking sector is an integral part of the countrys financial services industry. These sector witnessed a phenomenal growth in 2001-03 where deposits rose by almost100%.Thereare39scheduledbanks(including11foreignbanks)operatinginPakistan.Competition isrelatively high, especially after thechallenging capital adequacy benchmarks set by the State Bank of Pakistan to nourish a stable banking system.Attracting foreign investment and winning profitable customers are the only options left to banks for survival. Opportunities for foreign banks, especially in consumer and retail banking, are greaterthan ever before.In the financial year of 2004-05, the banking sector experienced growth rates of 21% and 36% in its deposit and advances portfolio respectively, which in turn, has increased the banks stability as compared to the preceding year.

Categorical Listing of Operating Banks Central Bank State Bank of Pakistan Nationalized Scheduled Banks First Woman Bank Ltd. National Bank of Pakistan Zari Taraqiati Bank (ZTBL

Specialized Banks Industrial Development Bank of Pakistan Punjab Provincial Cooperative Bank Ltd Private Scheduled Banks Askari Commercial Bank Limited Bank Al-Falah Limited Bolan Bank Limited Faysal Bank Limited Bank Al-Habib Limited Metropolitan Bank Limited KASB Commercial Bank Limited Prime Commercial Bank Limited PICIC Commercial Bank Limited Soneri Bank Limited Private Scheduled Banks

Union Bank Limited Meezan Bank Limited Saudi-Pak Commercial Bank Limited Crescent Commercial Bank Limited Dawood Bank Limited NDLC-IFIC Bank Limited (NIB)Allied Bank of Pakistan Limited United Bank Limited Habib Bank Limited SME Banks ABN Amro Bank N.VAlbaraka Islamic Bank BSC (EC)Americ Expresss Bank LimitedBank of Tokyo Mitsubishi LimitedCitibank N.A Foreign Banks

Deutsche Bank A.G.Habib Bank A.G. Zurich Hongkong & Shanghai Banking Corp Limited Oman International Bank S.O.A.G Rupali Bank Limited Standard Chartered Bank Limited Investment Banks Crescent Investment Bank Limited First International Investment Bank Limited Atlas Investment Bank Limited Security Investment Bank Limited Fidelity Investment Bank Limited Investment Banks

Prudential Investment Bank Limited Islamic Investment Bank Limited Asset Investment Bank Limited Al-Towfeek InvestmentBank Limited Jahangir Siddiqui Investment Bank Limited Franklin Investment Bank Limited Orix Investment Bank (Pak) Limite

State Bank of PakistanCore Functions of State Bank of Pakistan State Bank of Pakistan is the Central Bank of the country. While its constitution, as originally laid down in the State Bank of Pakistan Order 1948, remained basically unchanged until 1st January 1974 when the Bank was nationalized, the scope of its functions was considerably enlarged. The State Bank of Pakistan Act 1956, with subsequent amendments, forms the basis of its operations today. Under the State Bank of Pakistan Order 1948, the Bank was charged with the duty to "regulate the issue of Bank notes and keeping of reserves with a view to securing monetary stability in Pakistan and generally to operate the currency and credit system of the country to its advantage". The scope of the Banks operations was consider by widened in the State Bank of Pakistan Act 1956, which required the Bank to "regulate the monetary and credit system of Pakistan and to foster its growth in the best nationalinterestwithaviewtosecuringmonetarystabilityandfullerutilizationofthecountrys productive resources". Under financial sector reforms, the State Bank ofPakistanwasgrantedautonomyinFebruary1994.On21stJanuary,1997,thisautonomy was further strengthened by issuing three Amendment Ordinances (which were approved bythe Parliament inMay,1997) namely, StateBank ofPakistan Act,1956, Banking Companies Ordinance, 1962 and Banks Nationalization Act, 1974. The changes in the State Bank Act gave full and exclusive authority to the State Bank to regulate the banking sector, to conduct an independent monetary policy and to set limit on government borrowings from the State Bank of Pakistan. The amendments in Banks Nationalization Act abolished the Pakistan Banking Council (an institution established to look after the affairs of NCBs) and institutionalized the process ofappointment of the Chief Executives and Boards of the nationalized commercial banks(NCBs) and development finance institutions (DFIs), with the State Bank having a role in their appointment andremoval. The amendments alsoincreased the autonomy and accountability of the Chief Executives and the Boards of Directors of banks and DFIs. Like a Central Bank in any developing country, State Bank of Pakistan performs both the traditional and developmental functions to achieve macro-economic goals.

DEVELOPMENTAL ROLEOF STATE BANK

The responsibility of a Central Bank in a developing country goes well beyond there nugatory duties of managing the monetary policy in order to achieve the macro-economic goals. This role covers not only the development of important components of monetary and capital markets but also to assist the process of economic growth andpromote the fuller utilization of a countrys resources. Ever since its establishment, the State Bank of Pakistan, besides discharging itstraditionalfunctionsofregulatingmoneyandcredit,hasplayedanactivedevelopmental role to promote the realization of macro-economic goals. The explicit recognition ofthe promotional role ofthe Central Bank evidently stems from adesire to re-orientate all policies towards the goal of rapid economic growth. Accordingly, the orthodox central banking functions have been combined by the State Bank with a well -recognized developmental role. The scope of Banks operations has been widened considerably by including the economic growth objective in its statute under the State Bank of Pakistan Act 1956.TheBanksparticipationinthedevelopmentprocesshasbeenintheformofrehabilitationofbankingsysteminPakistan,developmentofnewfinancialinstitutionsanddebtinstrumentsinordertopromotefinancialintermediation,establishment of Development Financial Institutions (DFIs), directing the use of creditaccordingtoselecteddevelopmentpriorities,providingsubsidisedcredit,anddevelopment of the capital market

kse Market summary of commercial Banks

Commercial Banks

SYMBOLLDCPOPENHIGHLOWCURRENTCHANGEVOLUME

Allied Bank SPOT120.57119.60121.00118.80119.21-1.36128,900

Apna Microfin.6.206.406.406.206.200.001,000

Askari Bank22.1422.1022.2722.0022.220.08856,500

B.O.Punjab8.768.798.998.668.900.144,644,500

Bank Al-Falah28.9029.0529.1028.6629.020.121,067,500

Bank AL-Habib49.1349.0349.7949.0049.09-0.0468,000

Bank Of Khyber9.009.499.498.839.140.1411,000

Bankislami Pak.9.949.9010.259.8010.190.25192,000

Faysal Bank17.9517.9518.0017.7517.960.01954,500

Habib Bank SPOT214.60215.90218.00213.50214.53-0.07128,800

Habib Metropol35.7735.9936.0135.5535.63-0.1481,000

JS Bank Ltd5.755.805.805.655.750.0036,000

KASB Bank Ltd.1.551.591.591.521.560.0181,500

MCB Bank Ltd SPOT280.96281.00281.50278.50280.57-0.39189,000

Meezan Bank47.7847.0148.0047.0147.820.04106,000

National Bank.60.1060.3960.4459.8160.06-0.042,901,500

NIB Bank Limited1.961.962.001.931.990.033,909,500

Samba Bank7.227.207.257.117.250.0312,000

SilkBank Limited2.152.142.202.062.09-0.06184,000

Soneri Bank Ltd14.8214.6115.6014.5115.380.56243,500

St.Chart.Bank24.0024.0024.0023.7523.94-0.0620,500

Summit Bank3.083.073.133.013.07-0.01414,000

United Bank193.42192.80197.50192.80196.603.184,578,900

Pakistans Banking Sector can be classified under the following broad categories

Categories Descriptions State Bank of Pakistan Central bank and the Autonomous And Governing body for all banking For all banking operations in operations in the country. Nationalized Schedule Banks These deal primilary in industries of banking and capital market .They offer ahost of unique policies, banking trainingservice and product ,which includes loans, credit cards saving and consumers banking.

Private Schedule Banks Banks engage in channeling from depositors toTo lenders against the primary objective of acquiring profit i.e . banking spread.

Foreign Banks These concentrate primary on international Trade Finance innovative credit Orientation and plastic .moneySpecialized BanksThese banks are created with specific interest thus specializing and catering to a particular sector industry. Development/ Cooperative/ Investment Banks investment banks act as underwriter or agent serving as intermediary between an issuer of securitiesand the investing public.