DANISH MUZZAFAR

AMJADKHAN
ALI AMMAR MAITLA
INAM-UL HAQUE RANA
Banking Industry of Pakistan
In Pakistan all banks &DFI’s work under the supervision of state bank of
Pakistan. There are four major sectors in which SBP has divided banks
operations.
1. Corporate sector
2. SME
3. Agriculture
4. Consumer sector

SBP provide regulations according to which all banks should work

&continuously keep track that banks are complying through the
regulations or not.
Products/Services in Banking
Sector
Some major services in banking industry of Pakistan;

Current accounts Term accounts

Remittance services Traveler cheque
Investment banking Business loans
Running finance Debit cards
Online banking Mobile banking
Telephone banking Lockers facility
Personal loans Saving account
Credit cards Home loans
Demand draft Internet banking
Consumer Banking in Pakistan
Consumer banking which is one of the fastest growing sector of Pakistan
banking industry is also now a major interest point of the banks.
Initially consumer banking sector was only focused by the foreign
banks but its efficiency &profitability attracted other to come towards
this business but still the major share of consumer banking in Pakistan
is in the hands of foreign banks.
Products/Services of Consumer
Banking
Auto Loans
In Pakistan auto loans are purchase of brand new or used, imported or local
cars for private use. Auto financing and auto leasing both facilities are
offered by most of the banks. The average market rate for auto loans is 14-
16%
Home Loans
The loans taken for buying, buildings or renovating of house/land are
classified as home loans. For home loans both variable & fixed rate options
are available.
Personal Loans
These are generally unsecured type of loans but in certain cases when
the amount of personal loans increases the normal limit its remaining
portion must be secured.
Credit-Debit Cards
Credit cards allow a customer to make payments on credit. Initially
foreign banks were offering these cards but now many local banks are
also offering credit cards facility.
Debit cards are issued to the account holder of any bank in Pakistan
almost all the banks are offering this facility. The amount used by
debit card holder is automatically debited from the account of card
holder.
Deposit Accounts
All commercial banks are offering different kinds of deposit accounts.
These accounts ranges from customer to customer to fill the need of
every type of customer. Some major categories are:
 Current accounts
 Saving accounts
 Business accounts
 Term deposit accounts
 Foreign currency accounts
Wealth Management
Wealth management service is a new kind of service introduced in
consumer banking now a days. It covers all aspects of securing future
of bank's customer. It includes insurance, tax advisory, financial
consultancy, investment plans etc.
E- Banking
To facilitate its customer all local& foreign banks are offering high
technological e-banking services. some of the major banking services
provided by the banks are;
 Phone banking
 Internet banking
 Online banking
 Mobile banking
 ATM
SBP Prudential Regulations for
Consumer Financing
The state bank of Pakistan has divided the consumer financing in its
prudential regulations into four major areas which are;
 Credit Cards
 Auto Loans
 Home Loans
 Personal Loans
Auto Loans
 The vehicles to be utilized for commercial purposes shall not be covered
under the prudential regulations for consumer financing
 The maximum tenure for the auto loans finance shall not exceed 7 years.
 While allowing auto loans, the banks/DFI's shall ensure the minimum down
payment does not fall below 10% of the value of the vehicle.
 The banks/DFI's shall ensure vehicle remains properly insured at all times
during the tenure of the loan
 The banks/DFI's should ensure the a good number of authorized auto
dealers are placed at their panel to eliminate the chances of collusion
unethical practices.
Home Loans
 Banks/DFI’s shall determine the housing finance limit, both in urban and
rural areas, in accordance with their internal credit policy, credit worthiness
and loan repayment capacity of the borrowers.
 The housing finance facility shall be provided at maximum debt-equity
ratio of 85:15.
 Banks/DFI’s are free to extend mortgage loans for housing, for a period not
exceeding 20 years.
 The house finance by the bank/DFI’s shall be mortgaged in bank’s/DFI’s
favor by way of equitable or registered mortgage.
Personal Loans
 The clean limit per person for personal loans will generally not exceed Rs
500,000.
 Banks/DFI’s may assign clean limit beyond Rs 500,000 but not in excess of
Rs 2 million to their prime customers who have extraordinary strong
repayment capacity .
 In case where loan has been extended to purchase some durable
goods/items, including personal computers etc, the same will be
hypothecated with the bank/DFI’s besides other securities, which the
bank/DFI’s may require on its own.
 In case of running finance, it shall be ensured that at least 15% of the total
utilization of the loan during the year is cleaned up by the borrower for a
minimum period of 1 week.
Credit Cards
 The banks/DFI’s shall take responsible steps to satisfy themselves that
cardholders have received the cards, whether personally or by mail.
 Banks/DFI’s shall provide the credit card holders, the statement of account
at monthly intervals.
 Due date of payment must be specially mentioned on the account statement.
 Maximum unsecured limit under credit card to borrower shall generally not
exceed Rs 500,000.
 Banks/DFI’s may also allow financing under the credit card scheme in
excess of Rs 500,000/-(upto Rs 2 million) to other customers as well,
provided the excess amount is appropriately secured.
Credit Information Bureau
Introduction
The bureau is a repository of credit information of borrowers. The member
lending institutions provide credit data of their borrowers to the bureau
which consolidates, updates, and stores the same and provide information
to its members.
History of CIB
The CIB is a public sector credit bureau of Pakistan was established in 1992
by the SBP under section 25(A) of banking companies ordinance 1962.
Role of CIB
The CIB plays an important role in promoting financial discipline, better
credit risk management and prudent lending decisions.
CIB continue………..
There are two types of reports can be generated from CIB system:

 Consumer credit information report

 Corporate credit information report
Contribution of Consumer Banking in
Economic Development
Lending through credit cards, personal loans, auto loans, loans for
durable and housing finance emerged main stream of consumer
finance. The shape domestic demand an the lending strategy by the
banking sector in quite subtle ways. consumer finance has also
brought social change through higher circular of money and
relaxation of income constrains for borrowing particularly among
those middle class segments that were eager to become part of
growing economy and keen to benefit from economic growth.
Analysis and Findings
Challenges
Problem faced by borrowers
Problem faced by lenders
Opportunities
Conclusion and Recommendations
Conclusion
The consumer banking industry has many opportunities to grow, customer
wants convenience mode of banking for which new products& services
should be introduced.
wealth management service which is a new service in Pakistan consumer
banking industry .Its awareness should be increased.
Improper guidance, slow processing and bank statements are the major
problems faced by the bank’s customer in getting consumer loan. The
reason is that people applying for loan don’t have proper in formation about
the requirements by the banks and due to high number of application
lengthy procedure by banks loan processing is very slow. despite of many
changes by the banks in their policies and strict regulation by SBP still
bank's customers are facing hidden charges problem.
Recommendations
 Financing to negative area residents should be made available and terms &
policies be designed accordingly to reduce the chances of fraud.
 Markup charged on consumer finance should be reduced to a substantial
level so the spread between bank loans and deposit could be reduced and
customer could easily pay off the loans.
 Better return should be provided on deposit accounts.
 To facilitate the customer new products &services should be introduced
continuously.
 SBP should continuously update its regulations according to the need
of the people and economic situation of the country.
 Increase consumer awareness, give clear instructions and guidance.
 Make customer friendly policies but it should also cover the risk
factor.
 Markup charge on loan &interest given on deposits should be
regularly monitored and guided by SBP.