group 16-financial sector after nationalisation

8/7/2019 GROUP 16-Financial Sector after Nationalisation

1/18

IMPACT OF NATIONALISATION ON

THE FINANCIAL SECTOR OF

PAKISTAN

SOHAIB ZAHEER BUTT

ALI HAIDER

MUHAMMAD ZAHID

BAHAWAL SHAHRYAR

ZAIN-UL-ABIDEEN

RIZWAN JAVAID


2/18

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.


3/18

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


4/18

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


5/18

` 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


6/18

` 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%


10/18

MANUFACTURING VS AGRICULTURE

`

GDP in 1969-1970 32 %

` GDP 1974- 1980- 5% average


11/18

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


12/18

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


15/18

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)


17/18

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


18/18

DFIs:

` Political Influence

` Subsidized Financing

` Transformation EffectStock Market:

` No Growth

` Investor Interest

` No fresh Capital Mobilzation

group 16-financial sector after nationalisation

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