Hr Implications in Private Banks

8436 Words Aug 26th, 2010 34 Pages
Financial Sector Reforms and the Efficiency of Banking in Pakistan

Abdul Qayyum Registrar PIDE Email: abdulqayyum@pide.org.pk

Pakistan Institute of Development Economics (PIDE) Islamabad, Pakistan

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Financial Sector Reforms and the Efficiency of Banking in Pakistan

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INTRODUCTION The banking in Pakistan has been dominated by government owned

institutions. It has accommodated the financial needs of the government, public enterprises and private sectors (Khan, 1995; Khan and Khan, 2007). Public sector dominancy, among others, lead to inefficiency in the banking sector (Haque, 1997). The economic efficiency of the banks remained low that led to low savings and investment in the private sector which resulted in low growth
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None of these considered second generation reforms and their impact. Therefore there is a need of comprehensive assessment of the impact of financial sector reforms (especially 2nd phase of reforms i.e. 2002) on banking efficiency. It is to investigate weather efficiency of banking in Pakistan improves or not. For this purpose we used data from 1990 to 2006 for 20 domestic commercial banks. 3

Next section, after introduction, provides overview of status of banking and reforms in Pakistan, section three elaborates methodology and fourth section provides results. Final section concludes the study. 2 OVERVIEW OF FINANCIAL SECTOR Financial sector in Pakistan consists of regulators, commercial banks, development finance institution and stock market. Earlier the financial sector was supervised and regulated by three organizations such as State Bank of Pakistan, Pakistan Banking Council and the Corporate Law Authority (CLA). The SBP acts as central bank, Pakistan Banking Council (PBC) used to monitors the performance of nationalized commercial banks and Corporate Law Authority regulates the equity market. At the time of independence Pakistan inherited Habib Bank that was established in 1941 in Bombay (Mumbai) which after creation of Pakistan shifted from Bombay to Karachi. On 1st July 1948 the Government of Pakistan has established a central bank that is State Bank of Pakistan
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