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Growing banking sector of Pakistan

Banks offer a large array of financial services to attract customers and to meet their demands. The economists have often revealed banks as intermediaries between savers and users of capital. Banks are special intermediaries due to their unique capacity to finance production by lending their own debt to agents willing to accept it and to use it as money.

Being at the same time borrowing and landing institutions, banks also provide other types of services, like: payments, settlements and funds transfer, foreign exchange transactions, savings and investment services, payroll services, financial advice, investments and bill finance, safe-deposit boxes. So as to offer these financial services, commercial banks perform certain functions within the national economy: the function of deposit’ acceptance, attracting temporarily available resources from business and individual customers; the investment function, granting loans for those in need of financial support; the commercial function that enables fund transfer between account holders determined by many activities. Altogether, banks channel savings into productive capital, facilitate productive use of surpluses to generate employment and promote economic welfare and offer risk-free income to depositors.

INVESTMENT IN SECURITIES AND SHARES OF PAKISTANI SCHEDULED BANKS (Rs. Million)
Details
2014
2015
2016
June
December
June
December
June
Investment in Securities and Shares
4,490,304.3
5,191,601.1
6,011,774.8
6,752,158.1
7,610,278.2
(a) Federal Government Securities
2,125,727.2
2,640,857.0
3,017,006.1
3,377,903.4
3,975,046.5
(b) Treasury Bills
1,547,276.3
1,728,730.5
2,164,377.3
2,537,577.9
2,666,090.3
(c) Provincial Governments Securities
(d) Foreign Securities
140,184.4
97,653.5
104,955.0
99,727.8
185,504.3
(e) Others
677,116.4
724,360.1
725,436.4
736,949.0
783,637.1

Presently in Pakistan, commercial bank profits are growing on bigger volumes, enlarging transactions and rising businesses. Overall deposits of all commercial banks reached at Rs10,726.66 billion in March, while deposits and other accounts of specialized banks reached at Rs71.07 billion. It is also calculated that total assets of banks were at Rs14,941.67 billion. Lending by banks increased, too. The gross advances of all scheduled banks reached at Rs5,502.81 billion in the first quarter of FY2017. Lending by banks in the same period was Rs4,835.19 billion, which was 13.8 percent higher than the same period of FY2016.

Borrowing by all scheduled banks increased 2.8 percent to Rs2,025.84 billion in FY2017,as against to Rs1,990.44 billion in FY2016. The central bank states a much-awaited increase to Rs7,525.10 billion in investments by banks in FY2017, up from Rs7,039.33 billion in the previous year. It explains an increase of 6.9 percent. The approved foreign exchange reserves with banks were Rs996.45 billion in March, as against to Rs923.4 billion, a year ago, which is higher by 7.9 percent.

All these facts of the banking sector confirm a definite growth in all these sectors.

Banking sector experts revealed that the economy is moving up at a good pace. The enhancing health of the Pakistani economy is also testified by international rating agencies and global stock market operators who have described the Pakistan Stock Exchange as one of the top 10 emerging markets worldwide.

PAKISTAN INVESTMENT BONDS

The State Bank of Pakistan (SBP) sold Pakistan Investment Bonds (PIBs) worth Rs28.567 billion, which is lower than the pre-auction target of Rs50 billion.

The auction summary revealed that the government fetched little amount through the sale of PIBs as banks were seeking higher yields amid falling earnings. SBP sold Rs26.285 billion of 3-year bonds at 6.4062 percent, lower than 6.4066 percent in February auction.

SBP sold Rs1.053 billion of 5-year paper at 6.8993 percent, as against with 6.8994 percent previously. It sold Rs1.229 billion value of 10-year debt at 7.9402 percent, down from 7.9406 percent at the preceding session. SBP rejected all the bids in 20-year paper.

SUKUK

The growth of Shariah-compliant investment funds in Pakistan is helping fuel demand for Sukuk, or Islamic bonds, giving domestic companies new funding options while strengthening the case for Islamic pensions in other majority-Muslim states. Strong demand for Islamic funds, and in turn Sukuk, could encourage other states trying to deepen their Islamic capital markets, in particular in the Gulf region where private pensions are rare.

Pakistan´s Islamic banks lag their conventional peers, holding almost 13 percent of total deposits, while Islamic mutual funds and private pensions have a far greater market share. Islamic mutual funds held Rs242.7 billion in assets as of December, or 37 percent of the total.

Almost two-thirds of assets in Pakistan´s voluntary pension system (VPS) are now managed under Islamic principles. All 10 VPS managers offer Islamic pension products, worth a combined Rs14.5 billion, or 63 percent of total VPS assets with the largest VPS product being Shariah-compliant.

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