Abstract:
Pakistani banks indulge in catering the needs of government, public sector organization and serving only some big businesses. Fewer lending to small and medium enterprises was given before the reforms. Medium enterprises generated most of the development and employment. The middle class was totally ignorant by the banking sector before the reforms.
Most of the banks was owned by government and suffered from bureaucratic approach and staff came to bank at 9:00 am, just checks the files, has nothing to do and leaves at 5:00 pm. The revival rate was stumpy and almost 25% of the loans were considered as bad loans. This is because of the loans were given on personal relation basis, there were no documentation for the loans and afterwards banks were unable to recover the loans.
Banking sector plays a very judgmental role in the amelioration of the economy. State bank of Pakistan have taken many influential steps in order to increase the performance of banks in Pakistan.
After the reforms the banking system of Pakistan has witnessed highly positive financial results during the period, adding further strength to its key financial soundness indicators. Though the profitability has maintained its upward trend, factors such as the changing ownership structure, transformation in the banking system composition, emergence of more compatible banking institutions, venturing of banks into relatively newer and riskier areas, growing market competition, technological advancement and implementation of reforms etc. demand proactive surveillance, effective risk management and enhanced focus on corporate governance culture, thus making the role of SBP more challenging.
According to Ishrat Hussain Ex-president of state bank of Pakistan “In Pakistan banking system plays an important role in financial sector and account for 95% of this sector. Better performing banking system leads to economic growth and development of Pakistan”.
For this research, researcher consider the above statement and make an effort to investigate the impact of financial reforms that was undertaken in 1990s on Pakistani banking system in general and on economic development of Pakistan. Purpose of the research work is to determine that whether reforms led to have an impact on economic growth or not?
