Essay On Banking Sector In Pakistan

In 1950, Colin Clark, estimating the capital needs of China, India and Pakistan, pointed out that they must save 12.5% of the national income to absorb the increasing labour force and maintain the past rate of increase in productivity.In the under-developed countries, not only is the capital stock extremely small but, as pointed out above, the current rate of capital formation is also very low.During past five year period (2010-16), the NPLs relative to gross advances have declined from 15 to 9 percent.

It is also difficult to see who would distribute these savings among entrepreneurs.

It is through the agency of the banks that the community’s savings automatically flow into channels which are productive.

Asset risk in the context of banking refers to a high level of non-remunerative loans in total asset portfolio.

High levels of NPLs negatively impact banks’ supply of money to the economy and increase the cost of lending.

In this way, they promote the development of agriculture, trade and industry.

It is difficult to see how, in the absence of banks, could small savings be stimulated or even made possible.

No doubt, the NPLs on banks’ balance sheet not only affect their capital but also affect economic growth.

NPLs continue to grow because of bad lending, and dismal economic conditions.

The role of banks in economic development is to remove the deficiency of capital by stimulating savings and investment.

A sound banking system mobilizes the small and scattered savings of the community, and makes them available for investment in productive enterprises.

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