In the present economic life the finance has gotten a very important position. In this connection, the commercial and central bank are dealing with providing funds and loans both to private and public sector.
- ROLE OF COMMERCIAL BANKS IN THE MOBILIZATION OF DOMESTIC FINANCIAL RESOURCES.
In this country like Pakistan, the shortage of savings is not only an obstacle in the way of capital formation, but the real problem is also of immobilization of such resources. Such immobilization is due to following reason:
- In our country majority of the population lives in villages. These people are bound to keep their savings in the form of hoarded money, gold lands and grains due to lack of knowledge regarding investment opportunities, illiteracy and fear of being taxed. Such all is not productive. They could earn interest if they had deposited these amounts in the banks.
- In our country the barter system still prevails in the villages. Again, in the urban life most of the transactions are made with the help of cash. Thus, when people keep the grains or the cash, they lose interest, which they could have earned against them.
- Because of market imperfections people keep the grains or the cash. Thus, when people keep the grains or the cash, they lose interest which they could have earned against them
- “Because” of market imperfections people are not aware of with investment opportunities. Moreover, people are not prepared to invest in the risky projects. In such circumstance 0 the savings of the people either go for conspicuous consumption or they are deposited with the friends, relatives, landlords and commission agents.
Against such practice, the farmers with small income, the white-collar urban class and the people from services sector fail to earn any profit or interest.
- About 40 lac Pakistanis are working abroad. Most of them send their remittances through their friends, relatives and those engaged in the “Hundi Business”. As a result, they fail to earn the interest which they could have earned against such amounts.
In such situation, to promote saving or mobilize the financial resources, the commercial banks can play an important role. It is evident from the following discussion.
- More and more-commercial banks be opened in the economy, particularly in the private sector. Such banks should be established in small cities, towns, villages and the interior regions of the provinces. With this step, the small and scattered savings of shopkeepers, small businessmen and small fanners could be put together. Then they could be used for capital formation. Opening of more banks, on the one side will promote savings, on the other side they will discourage the unproductive expenditures. The craze on the part of people to purchase gold, land, properties and grains will shrink. As a result, inflation could be controlled.
- To boost savings on the part of the people, commercial banks can initiate different schemes. Through these schemes the depositors can be given certain bonuses and prizes. As in 1999, all the commercial banks introduced the scheme like ‘Crore Pati-Scheme’ and ‘Caramad scheme’ to attract savings. With such schemes, the banks raised the deposits worth Rs 40 billion. With such schemes, the depositors were to get interest as well as prizes. Later on, these schemes were finished.
- For the sake of resource mobilization, commercial banks can initiate different schemes like ‘School Saving Scheme’ and ‘Office Saving Scheme’. With such saving schemes, the students and employees would be making more savings. As a result, they will earn interest while economy will be having more financial resources.
- In order to promote savings, the commercial banks can depend upon advertisement. Now days the electronic and print media have attained a lot of importance. Therefore, if the commercial banks create awareness among st the people regarding importance of savings through media, the savings could be enhanced. The people be taught that the savings of the present generation will provide a better future for the coming generation.
- Because of establishment and extension of banking services, the use of cash and barter system will come down. This will promote the use of cheques, drafts, CDRs and traveler’s cheques. As a result, the banks and the economy will be having funds and public would get interest. Moreover, this will economize the use of currency notes and coins.
- “As” told earlier that 40 lac Pakistanis are working abroad. They send their remittances to their homes. The commercial banks, by joining the remittances market, can induce people to send their remittances through the banking channel. This can be done by offering different incentives. As a result, not only the people working abroad will earn interest, but the economy will also be having a greater amount of foreign exchange reserves through the remittances. As during the year 2008, our remittances through the banking channels were $5.3 billion, while they were about $7 billion in 2008-9.
NATIONALIZATION TO PRIVATIZATION OF COMMERCIAL BANKS
Since Partition to 1973, the commercial banking system was private owned and controlled. But following the manifesto of his party, Z.A. Bhutto nationalized all the commercial banks On 1st January 1974. The number of nationalized banks was 23 out of which 15 were Pakistani and remaining 8 were the foreign banks. The number of inland Pakistani branches was 3397 while there were 75 bank branches out of the country. They were having the deposits of Rs 2255 crore while they had advanced the loans worth Rs 1343 crore. Not only the scheduled commercial banks were nationalized, but SBP, IDBP, ADBP and cooperative banks were also taken over by the government. The banking Council reorganized the taken over banks in the following way:
- Bank of Bahawalpur war merged with National Bank of Pakistan (NBP)
- Habib Bank Overseas and Standard Bank were merged into Habib Bank Limited (HBL)
- Commerce Bank was amalgamated with United Bank Limited (UBL)
- Premier Bank was merged with Muslim Commercial Bank (MCB)
- Allied Bank Limited was formed by combining Pak. Bank, Sarhad Bank, Lahore Commercial Bank and Australia Bank.