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IMPACT OF NATIONALISATION ON
THE FINANCIAL SECTOR OF
PAKISTAN
SOHAIB ZAHEER BUTT
ALI HAIDER
MUHAMMAD ZAHID
BAHAWAL SHAHRYAR
ZAIN-UL-ABIDEEN
RIZWAN JAVAID
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HABIB GROUP
Habib Bank Ltd.Habib Bank Over
Seas.
DAWOOD GROUP
Memon Cooperative Bank
Lahore Commercial Bank
Punjab Cooperative Bank
Pakistan Bank Limited
Bank of Bahawalpur
United Bank Ltd- Seigol
Muslim Commercial Bank- Adamjee
Australasia Bank- Colony
Premier Bank- Arag
Commerce Bank Ltd.- Fancy
BANK MAFIA- THE SAME 22
FAMILIES
Interlocking of ownership with
commercial and industrial
interests.
Control over PICIC & PIDIC
80% of banking, 70% of insurance
assets, 43% of all industrial
licenses, and 64% of credit by
PICIC.
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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%
CREDIT CONCENTRATION
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Rural and less developed areas deprived.
Credit starvation of small scale enterprises andagriculture.
Misuse of powers by BODs and no Accountability
Arrogant attitude towards small investors
PPPs Manifesto
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` Amalgamation of 12 private owned banks into 5
NCBs
Habib Bank Ltd, Muslim Commercial Bank,
National Bank of Pakistan, Allied Bank, UnitedBank
` Agricultural Advisory Committee
` Standing Committee for Export Finance
` Credit Guarantee Scheme to absorb losses onsmall agricultural loans
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` Peoples Finance Corporation and National
Development Finance Corporation
` Pakistan Banking Council1. Coordinating activities of 5 NCBs
2. Policy recommendations to Federal Govt.
3. Bank performance
` Compensation to S/H of the NCBs
` New BODs appointed
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0
1000
2000
3000
4000
5000
6000
7000
8000
1971 1975 1976 1977 1978
No. of Branches
Every 5000 population area to be facilitatedwith at least bank.
Increase Banking habits.
Foreign bank branches.
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0
5000
10000
15000
20000
25000
1972 1973 1974 1975 1977 1978Total Current Deposits
Savings Deposits
Fixed Deposits
Fixed Deposits
Due to bank branches
Saving accounts helped create a large deposit base for
credit extension and investment.
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1972 1973 1974 1975 1976 1977
Agriculture, Fi
shing, and
Hunting
8.96% 10.42% 10.96% 12.71% 15.55% 15.82%
Manufacturin
g
48.23% 46.82% 44.65% 43.55% 43.53% 42.95%
Construction 1.15% 1.13% 1.14% 1.64% 2.02% 2.39%
Energy ,
Power
0.34% 0.21% 0.29% 0.83% 0.60% 0.34%
Commerce 27.17% 27.80% 26.77% 25.08% 22.42% 21%
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MANUFACTURING VS AGRICULTURE
`
GDP in 1969-1970 32 %
` GDP 1974- 1980- 5% average
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31 Dec y/e Currency in
Circulation
% increase Schedule
Bank
Demand
Liabilities
Schedule
Bank Time
Liabilities
Monetary
Assets
% change in
Monetary
Assets
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
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Total Investments of the 5 Nationalized Commercial Banks (1974-78)
Loans and Advances Government Securities Rs(ooos)
1972 11284976 4668448
-1 % 27.90%
197 9465319 5971721
7 % -14%
1974 16416710 5113909
24.40% 1 .50%
1975 20423992 5959076
1% 50.21%
197 26798364 8951384
11.80% 20.40%
1977 29964994 10776138
22.40% 8.90%
1978 36681926 14966039
BANKS PERFORMANCE THE SHORT TERM IMPACT
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1973 1974 1975 1976 1977 1978
0.37 0.39 0.39 0.41 0.72 0.56
1974 1975 1976 1977 1978 1979
0.8% 0.84% 0.76% 0.75% 0.62% 0.65%
Liquidity Ratio
ROA
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` 30% of deposit base in government debt
` Credit ceiling on sectors
` Political affiliations
` Non-performing loans` Declining professionalism
` Misrepresentations in accounts
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1972 1973 1974 1975 1976 1977
871857 940347 1242742 1116661 1515361 1998259
- 7.86% 32% -9% 35.7% 32%
ADVANCES
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` 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)
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1981-85 1981-85 (Percent
increase)
Staff 12.5 6.5
Administrative Costs 42.1 24.4
Total Expenditure 25.1 30.8Interest 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
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DFIs:
` Political Influence
` Subsidized Financing
` Transformation EffectStock Market:
` No Growth
` Investor Interest
` No fresh Capital Mobilzation