Banking Industry Of Pakistan

Published Date: 02 Nov 2017

"Bank is a financial institution or organization registered by the state government whose main function is to receive deposits (time or demand deposits) and pay interest on them or makes loans or invests the money in market. There are mainly two types of banks: investment banks and commercial/retail banks". (Source: Dictionary, Oxford. "Bank.")

The History of banks in Pakistan was a brief one. It is said at the time of partition there were only 487 branches of banks which were located in Pakistan but this number further reduced to 195 by June 1948. During the early days Pakistan did not have any central bank of Pakistan as before partition the Reserve Bank of India was the central bank of the sub continent. Pakistan had to work without its own Central Bank and it was decided that Pakistan should continue its working with the Reserve Bank of India as it was happening before and all the affairs of the banks working in Pakistan were controlled and managed by Indian Central bank. (Hujat Ali Baig, 1999)

After the independence there was instability in the government and uncertainty was also there for businessmen which resulted in huge losses in the banking sector and caused negative outcome for the banking sector of Pakistan. Many private banks which previously had their offices in Pakistan shifted their offices to India. This may had been to un-stablize Pakistan as many Indian banks intentionally did this. Only few banks were left in Pakistan and those too were trying to wind up their businesses. The number of Banks reduced sharply and by June 1948 the number fell to only 195 from 487 branches. (Uzma Zia, 2005)

In order to control this deteriorating situation a committee was formed to create a plan. It seemed to be tough task as Pakistan had the shortage of trained people to work for the Central Bank of Pakistan. Shortage of trained people resulted in great difficulties for the government to make a full fledged Central Bank. There was a severe need for creation of a Central Bank so as to save the country’s banking system and maintaining stability of the government by making independent monetary policy.

CURRENT SITUATION OF THE BANKING SECTOR

There was considerable impact on Pakistan’s banking sector due to the reforms in 1980s and 1990s. Privatization and entry of new banks gave competition and stronger incentive to cut their cost so that maximum revenue should be achieved. With the change of ownership from state owned to private, there was also a change in the interest rates, credit controls and also the restrictions on the banking sector were abolished. It is obvious that such shifts would have positive effects on the banking sector of Pakistan as it required advance and efficient practices. (Patti and Hardy, 2003)

Interest free banking was also introduced in the banking sector also known as Islamic banking. This system was introduced to eliminate interest based banking under Sharia. In 1980 Modaraba Companies law was introduced. Many existing definitions were revised such as Creditors, debtors, advance credits, Interests and so on in order to carry out interest free banking. This new concept was very successful in Pakistan banking system and many new branches were opened and used the techniques laid down under Islamic Banking starting from 1981. (Uzma Zia, 2005

Organizational structure

Organizational Structure of the Askari Bank is well managed and structured, under the supervision of top and lower level management flows the rules and policies made by the higher level management. Askari bank is following Centralized system of management. Departments are designed in such a way that achieved objectives and goals within time. The structure of Askari bank is designed in a way to achieve objectives and goals of the bank and enhancing and improving their daily activities and increasing employee coordination and job satisfaction

Strength

Strength builds the foundation of the organization and can be achieved by competitive advantage.

Following are the strengths of Askari Bank

As Askari Bank is funded by Army Welfare Trust having strong army background with this people gives more trust to it.

Since the establishment the growth of the bank is stable and it is one of the The Askari Bank has stable growth since its establishment and best private sector bank of Pakistan.

The use of ATM makes it 24/7 Banking.

Visa Debit card accessed worldwide.

Equity rating is good (the long term entity rating of bank is of A+, and short-term entity rating of A1).

Services are according to customer oriented.

Electronic banking.

I .NET banking.

IT structure is strong.

Very good brand loyal.

Commercial and Islamic Banking.

huge Banking branch network.

Can adopt to the changing environment easily.

Public Image and ethical concern.

Banking is worldwide.

The staff is well educated.

Weakness

Following are the weaknesses of Askari Bank:

Centralization.

Due to centralization the decision implementation is slow.

Dual entry system offline and online.

Lacks in training of employees.

No trade union exist is Askari ank so no job security for employees.

High employee turnover .

Lack of specialization.

Most of the better facilities are only for Army personnel (high rate of return).

Cash withrdrawl limit from ATM is low.

General public are provided with low number of facilities.

Rate of return on deposits is low.

It lacks in computer specialist at branch level so assistance has to be taken from head. office which slows the process.

Opportunities:

Opportunities helps the business to explore new ways, opportunities for Askari Bank are:

Askari Bank has most comprehensive and extensive network around the world.

Askari Bank deal in bulk Businesses.

Potential growth is very strong and foreighn investments is fascinated.

Increase number of network remote areas.

With Increased customers satisfaction it increases ratio of deposit.

Increase rate of return.

Increasing Islamic branches network.

With Better Technological improvement business performances enhances.

Providing the customers with international standard banking.

To increase the rate of investment acquisition and merging Merging and acquisition is the best opportunities for Askari Bank.

Opening of branches worldwide.

By promoting campaigns of new services Askari Bank can increase its operations.

Threats:

Threats can create trouble for the organization , Threats for Askari Bank are:

Employee security is low.

Employee turnover ratio is high.

It lacks in employee training.

At low level staff is inexperienced.

Job promotion rate is low.

As the customer migration rate is high so it offers low rate of return.

Due to low promotion of its band it can loose its market share.

Products are less innovative.

Due to global banking the competition rate is increased.

Political instability in Pakistan.

FEASABILITY REPORT

Prospects and Plans:

Through operational efficiency, upgrading of new product developing well structure system of networking, Askari Bank will increase its focus on growth.

For being the leader in the corporate world the bank must enhance its sales and marketing , improving its customer service, aim of achieving greater motivation of employees and facilitating the stakeholders with the best value.

Askari bank has set plans to ensure profitability and sustained growth in the future.

Askari will keep on striving in building a strong, motivated and dedicated team of employees where the total dedication will be towards the satisfaction of customers and organization’s wealthy growth.

Askari will strive to maximize the value of its shares. The enhancement in its return and capital will be ongoing process.

The interest of Askari bank is to being the most viable institutions financially . the plan is to develop new innovating and different products to the demand of the customers. The aim of the bank is to be the market leader