Nov 10 - 16, 2008

Pakistan's banking system is standing on strong footing and there is no threat to it by world economic turmoil, as Pakistani banks are practicing the strongest banking system with better risk management.

This was crux of views expressed by financial experts and bankers while talking to Pakistan and Gulf Economists with reference to global financial crisis.

They maintained that the Pakistani banking system has become stronger during the last 15 years and the local banks made them stronger so there was no threat to Pakistani banks in present scenario. Through proper and proactive planning, the banks had gradually enhanced their check and balance systems, which helped them to make their infrastructure stronger and dynamic.

Mr. Salman Raza, Regional Head, Commercial Banking Group MCB appreciated the SBP policy to inject Rs 270 billion liquidity in the banking system in recent days to stabilise the banking system. He stated that the SBP has proposed significant amendments in the Banking Companies Ordinance whose objective is to strengthen the oversight of financial sector in accordance with the 10- year Strategy and Blueprint of Financial Sector Reforms of the State Bank.

On the other hand, sources in SBP said that the Central Bank, as part of its overall financial sector reforms launched in July 2008, has been advocating the need for legislature to empower the Central Bank to augment its oversight of the financial sector.

He said the amendments proposed by SBP would result into significant benefits in the form of operational efficiency, lower costs, reduced prices and innovation in products and services. He said one of the Core Principles for effective banking supervision (CP-24) issued by Basel Committee on Banking Supervision requires that a banking supervisor should be able to supervise the banking groups on a consolidated basis. Presently, Pakistan is either compliant or largely compliant with all the core principles except those dealing with consolidated supervision, he added.

The Lahore Chamber of Commerce and Industry (LCCI)'s Convener on Women Entrepreneurs Ms Shamim Akhter said that although rates enhanced, but the banks are still paying a low return to the depositors on their deposits despite the fact that inflation has gone up as banking spread recorded more than 7 per cent rate of return in July 2008. To encourage a savings culture in the country, rate of return on deposits should be enhanced so that people could feel a motivation for savings, she asserted.

She further said that savings accounts represent only 43-percent of total deposits of the banks and State Bank of Pakistan had recently directed a minimum 5 percent profit payment on these accounts, which is quite low as compared to very high lending rates, he added.

She said an analysis of the interest rate pattern in Pakistan shows that the spread fluctuated between 5.95 and 9.58 per cent during 1990-2005, while during the last three years the spread exceeded 7 per cent on an average.

Despite enhanced profitability, banks are actually discouraging savings and increasing Pakistan's dependence on external sources which is not in our national interest, she remarked. She was of the view depositors would have received much higher returns had the banks shared their profits, with them in an equitable manner as the total pre-tax profits of banks had gone up form Rs 7 billion in 2000 to Rs 123.6 billion in 2006.


JS Bank Limited, one of Pakistan's fastest growing banks has signed a Memorandum of Understanding (MoU) with Mobex Limited. A signing ceremony was held in this connection at the JS Bank's head office in Karachi. The MoU will provide the basis for collaboration between JS Bank and Mobex for planning and developing a branchless banking solution across Pakistan which is designed to provide banking solutions to the un-banked masses of the country.

Branchless banking represents a significantly cheaper alternative to conventional branch-based banking that allows financial institutions and other commercial players to offer financial services outside traditional brick and mortar branches by using alternative delivery channels such as retail agents and mobile phones.

The MoU was signed on behalf of JS Bank by Mr. Naveed Qazi, President and CEO JS Bank and by Mr. Mohammad Yar Hiraj, CEO, MOBEX. Present at the occasion were also senior members of the management of both organizations. Speaking after the signing ceremony, Mr. Qazi commented, "Branchless banking in many ways represents the future of banking as it will allow banks to service more customers at a lower cost. The State Bank has also been extremely supportive of branchless banking by already issuing a comprehensive set of guidelines and we hope to take advantage of this by being amongst the first movers in this area". He added that, "reaching out to more customers in more places is the cornerstone of JS Bank's expansion strategy and branchless banking will indeed be a crucial step to help us bring in new customers not just to the bank but also into the banking system across Pakistan".

JS Bank will use branchless banking to substantially increase the outreach of its products and services to the un-banked communities. The primary objective would be to allow masses spread across the peri-urban, suburban and rural landscape of Pakistan to assimilate them into the mainstream banking system through the use of integrated technology solutions. By doing this, JS Bank and Mobex aim to familiarize the majority of Pakistanis not attuned to banking services unlike the economically emancipated urban society. Building a branchless banking platform complements JS Bank's strategy to aggressively expand its footprint across the country by opening over 100 branches by 2010.


JS Bank Limited, one of Pakistanís fastest growing and upcoming banks announced its financial results for the third quarter, 2008. The bank has seen some robust performance, successfully earning a net profit of Rs.122.57 million for the period ended September 30, 2008. During the quarter, JS Bank also saw its deposit base witness a steady growth standing at Rs. 14.70 billion on September 30, 2008. Likewise total assets of the bank have also shown an upward trend having reached a level of Rs.21.88 billion as at September 30, 2008.

Given that the bank has shown such robust performance in what has been a difficult time or the local economy, is testament to the prudent management and financial discipline at the bank. As a result of the bank achieving such positive numbers, the Board of Directors of JS Bank in a meeting held on September 29, 2008 announced one Right Share for every five Shares held i.e. 20% at par value of Rs. 10/- per share, December 5, 2008 being the last date of payment.