Financial institutions play a key role in positioning a country on a track which leads it

towards better living standards and better economy. Pakistan is developing country which is in
the need of better financial institutions specially banks. Therefore it can be very helpful to
know the present situation of banking sector in context of its performance with the change in
competition.
Bikker and Haaf (2002) measured the concentration ratios and competition which are of
great importance for policy making in banking sector. This study estimated the structural and
non-structural competition. In the study concentration ratios was used to measure the
competitive performance of banking industry due to market structure. The concentration ratio
such as Herfindahl-Hirschman Index (HHI), the Hall-Tideman Index (HTI) etc. was measured
by using indexes. The policy makers used the measures concluded by these ratios to select the
concentration ratio which could satisfy their needs at its best.
N. Berger, Kunt, Levine and Haubrich (2004) found that the competition and
concentration ratio has an influence over the policies of banking sector. The study used ratios
such as Herfindahl-Hirschman Index (HHI) and k-bank concentration ratio for their findings.
The study concluded that the concentration ratio and competition most needed for banking
sectors. The concentration measure is the indicator of competition. The research identified that
the competition in banking sector is good from social perspective.