IMPACT OF NATIONALISATION ON

THE FINANCIAL SECTOR OF

PAKISTAN
•SOHAIB ZAHEER BUTT

•ALI HAIDER

•MUHAMMAD ZAHID

•BAHAWAL SHAHRYAR

•ZAIN-UL-ABIDEEN

•RIZWAN JAVAID
 DAWOOD GROUP

HABIB GROUP •Memon Cooperative Bank

•Lahore Commercial Bank
•Habib Bank Ltd. •Punjab Cooperative Bank
•Habib Bank •Pakistan Bank Limited
Over Seas. •Bank of Bahawalpur

BANK MAFIA- THE SAME 22

FAMILIES

•United Bank Ltd- Seigol •Interlocking of ownership with

•Muslim Commercial Bank- Adamjee commercial and industrial
•Australasia Bank- Colony interests.
•Premier Bank- Arag
•Commerce Bank Ltd.- Fancy •Control over PICIC & PIDIC

•80% of banking, 70% of insurance

assets, 43% of all industrial
licenses, and 64% of credit by
PICIC.
 CREDIT CONCENTRATION

Economic Groups Jun-53 Jun-63 Jun-72

Agriculture, forestry, fishing and hunting 94.8 232.7 1156.8

18.40% 7% 9%
Manufacturing 82.4 1236.5 6124.3
16% 37.40% 49.30%

Electricity, Gas, Water, and Sanitary

services 1.1 7.3 68.6

Commerce 217 1315 3182.8

42% 39.80% 25.60%
 
• Rural and less developed areas deprived.

 
• Credit starvation of small scale enterprises and
agriculture.

• Misuse of powers by BODs and no Accountability

◦ Arrogant attitude towards small investors

◦ PPP’s Manifesto
 Amalgamation of 12 private owned banks
into 5 NCBs
Habib Bank Ltd, Muslim Commercial Bank,
National Bank of Pakistan, Allied Bank, United
Bank
 Agricultural Advisory Committee
 Standing Committee for Export Finance
 Credit Guarantee Scheme to absorb losses on

small agricultural loans

 People’s Finance Corporation and National
Development Finance Corporation

 Pakistan Banking Council

1. Coordinating activities of 5 NCBs
2. Policy recommendations to Federal Govt.
3. Bank performance
 Compensation to S/H of the NCBs
 New BODs appointed
•Every 5000 population area to be facilitated
with at least bank.
•Increase Banking habits.
•Foreign bank branches.
 1972 1973 1974 1975 1976 1977

Agriculture, 8.96% 10.42% 10.96% 12.71% 15.55% 15.82%

Fishing, and
Hunting

Manufacturin 48.23% 46.82% 44.65% 43.55% 43.53% 42.95%

g

Construction 1.15% 1.13% 1.14% 1.64% 2.02% 2.39%

Energy , 0.34% 0.21% 0.29% 0.83% 0.60% 0.34%

Power

Commerce 27.17% 27.80% 26.77% 25.08% 22.42% 21%

MANUFACTURING VS AGRICULTURE

 GDP in 1969-1970 – 32 %

 GDP 1974- 1980- 5% average

31 Dec y/e Currency in % increase Schedule Schedule Monetary % change in
Circulation Bank Bank Time Assets Monetary
Demand Liabilities Assets
Liabilities

1973 8799 15% 11794 10253 32682 +7.1

1974 10733 22% 11917 9567 33979 +4.13

1975 11881 11% 14588 12955 41352 +21.7

1976 13852 17% 16453 17486 54899 +32

1977 17349 25% 21310 20396 63271 +15.2

1978 20983 21% 23244 22346 75363 +19.1

BANKS’ PERFORMANCE – THE SHORT TERM IMPACT

Total Investments of the 5 Nationalized Commercial Banks (1974-78)

Loans and Advances Government Securities Rs(ooo’s)

1972 11284976 4668448
-16% 27.90%
1973 9465319 5971721
73% -14%
1974 16416710 5113909
24.40% 16.50%
1975 20423992 5959076
31% 50.21%
1976 26798364 8951384
11.80% 20.40%
1977 29964994 10776138
22.40% 38.90%
1978 36681926 14966039
Liquidity Ratio

1973 1974 1975 1976 1977 1978

0.37 0.39 0.39 0.41 0.72 0.56

ROA

1974 1975 1976 1977 1978 1979

0.8% 0.84% 0.76% 0.75% 0.62% 0.65%

 30% of deposit base in government debt
 Credit ceiling on sectors
 Political affiliations
 Non-performing loans
 Declining professionalism
 Misrepresentations in accounts
ADVANCES
1972 1973 1974 1975 1976 1977

871857 940347 1242742 1116661 1515361 1998259

- 7.86% 32% -9% 35.7% 32%

 ADBP (70% of total reimbursements)
 National Development Finance Corporation
 House Building Finance Corporation
 Small Business Finance Corporation
 Pakistan Industrial Credit and Investment

Corporation (PICIC)
 Industrial Development Bank of Pakistan

(IDBP)
 1981-85 1981-85 (Percent
increase)
Staff 12.5 6.5
Administrative Costs 42.1 24.4
Total Expenditure 25.1 30.8
Interest on loans 19.8 21.5
Total Income 28.0 24.1
Operating Profits 34.9 13.7
Disbursements 33.8 32.4

Low Industrial Credit and ensuing drawbacks

DFIs:
 Political Influence
 Subsidized Financing
 Transformation Effect

Stock Market:
 No Growth
 Investor Interest
 No fresh Capital Mobilzation