LECTURE 8

Banking and specialized credit

institution
 Banking
 A bank may be defined as an institution that
accepts deposits, makes loans, pays checks, and
provides financial services.
 A bank is a financial intermediary for the
safeguarding, transferring, exchanging, or
lending of money.
 A primary role of banks is connecting those
with funds, such as investors and depositors, to
those seeking funds, such as individuals or
businesses needing loans.
 Types of Bank
There are various types of banks which operate in
our country to meet the financial requirements of
different categories of people engaged in
agriculture, business, profession, etc.
 Central Bank
 A bank which is entrusted with the functions of
guiding and regulating the banking system of a
country is known as its Central bank. Such a
bank does not deal with the general public. It
acts essentially as Government’s banker
 maintain deposit accounts of all other banks
and advances money to other banks, when
needed.
 The Central Bank provides guidance to other
banks whenever they face any problem.
 It is therefore known as the banker’s bank.
 The Central Bank maintains record of
Government revenue and expenditure
 It also advises the Government on monetary
and credit policies and decides on the interest
rates for bank deposits and bank loans.
 Another important function of the Central
Bank is the issuance of currency notes,
regulating their circulation in the country by
different methods. No other bank than the
Central Bank can issue currency.
 Commercial Banks

Commercial Banks are banking institutions that

accept deposits and grant short- term loans and
advances to their customers.
In addition to giving short-term loans,
commercial banks also give medium-term and
long-term loan to business enterprises. Now-a-
days some of the commercial banks are also
providing housing loan on a long-term basis to
individuals.
 Types of Commercial banks:
Commercial banks are of three types i.e.
1. Public sector banks,
2. Private sector banks and
3. foreign banks.
1.Public Sector Banks:
These are banks where majority stake is held by the
Government of Pakistan or State Bank. Examples of
public sector banks are: State Bank of Pakistan,
Corporation Bank, the Bank of Punjab, First Women
Bank Limited, the bank of Khyber, Sind Bank
Limited.
2. Private Sectors Banks:
In case of private sector banks majority of share
capital of the bank is held by private individuals.
These banks are registered as companies with
limited liability.
 For example: Silk Bank Limited, Bank Al

Habib, United Bank Limited etc.

3. Foreign Banks:
These banks are registered and have their
headquarters in a foreign country but operate their
branches in our country. Some of the foreign banks
operating in our country are:
1.The Bank of Tokyo-Mitsubishi UFJ Limited
2. Citibank N.A. - Pakistan operations
3. HSBC bank middle east limited – pakistan
4.Dubai Islamic Bank (Pakistan) Limited
5.Industrial and Commercial Bank of China Limited
 Agricultural Development Bank of
Pakistan (ADBP)

 Agricultural Development bank was created in 1952 under

a Central Act for the purpose of expanding financial
facilities and promoting the development and
modernisation of agriculture in Pakistan.
 The Zarai Taraqiati Bank Limited (ZTBL), formerly known
as Agricultural Development Bank of Pakistan, is the
largest public sector Specialized financial development
institution in Pakistan.
 The bank provides agriculture credit and banking services
to farmers The bank remains the largest public sector
agriculture development financial institution in the
country.
 Industrial Development Bank of
Pakistan
IDBP
 “IDBP was established in August, 1, 1961.”
 IDBP is one of Pakistans’ oldest development
financing institution created with the primary
objective of extending term finance for
investment in the manufacturing sector of the
economy.
 IDBP has also become an important component
of the financial sector of Pakistan and is playing
an active role in money and capital market of
the country.
 REASON FOR
ESTABLISHMENT( IDBP)
 The Bank provides medium and long term
finance in local and foreign currencies for the
creation of fixed assets to new industrial
projects as well as for expansion.

 It also facilitates transfer of technologies from

developed countries to industrial enterprises in
Pakistan.
 Islamic Banking
 Islamic banking is interest free banking, in
which there is no fixed rate of return.
 Islamic banking is the banking system which is
run in accordance with the Islamic laws and the
Shari’a
 Islamic banking is the banking that is guided
by Islamic law ( Shari a`) principles and guided
by Islamic economics. In particular, Islamic law
prohibits usury, the collection and payment of
interest,
 Islamic banks in pakistan
1. Meezan Bank Limited.
2. Al Baraka Bank.
3. BankIslami Pakistan Limited. etc
 International Monetary Fund (IMF)
 The International Monetary Fund (IMF) was
created in 1945 and is governed by and
accountable to its 188 member countries.

 Its headquarters are in Washington, United

States.
 Functions of IMF
Three Major Functions of IMF
1. Surveillance
Gathering the data and gives advices in making
policies of the country.
2.Technical Assistant
Strengthening the human skills and institutional
skills of the country.
3.Financial Assistant
Lending to countries to support reforms