Acknowledgement

Let me begin my acknowledgement by thanking God who bestowed me the

courage and wisdom to complete this report. I am thankful to the entire faculty
member for providing the suggestion on how the research could be done and
improved. I am fortunate to have the opportunity to develop this report under kind
supervision of my teachers especially Sir Faid Gul. I am grateful to my fellow’s for
putting their heart and soul into this project and for tolerating my continual
barrage of phone calls and e-mails. And a very loving thank you goes to my
parents, whose guidance and prayers brought the project into this form.

1
ABRIVATIONS
SBP State Bank of Pakistan.
NCB Nationalized Commercial Bank.
DFI Development Finance Institutions.
CIRC Corporate and Industrial Restructuring Corporation
SDC Standard Debt Contracts
EBIT Earning before interest and tax.
LTD Long term debt.

2
 Executive summary
Banks are financial intermediaries that supply financial services to surplus and
deficit units of the economy. In other words a bank uses the deposits of the bank
to issue loans to households; businesses etc and earn a return on them. Are
banks special intermediaries? Most bankers believe that the defining business of
banking is lending. Inattention to loan policies. Disregard of the banks own
policies, Unsafe concentration of credit, Poor control over loan personnel, Loan
growth over the bank’s ability to control quality, Poor systems for detecting loan
problems.
To overcome their deficiencies in systems and procedures that spawn poor
loans, banks must develop a credit culture supported by well conceived
management strategies for controlling credit risk. For a bank to set a correct
credit culture a bank must establish its priorities with respect to the market place.
An important feature reflected in credit data is the expansion of bank credit for
non-seasonal purposes. The rate of absorption of bank credit in the economy has
consequently increased manifold. The increase flow of bank credit in recent year
has been widely disturbed among different sectors of the economy. However, a
significant development is the comparatively flow of bank credit to certain sector,
which had a lesser claim on bank resources before 1959. Financial health of the
banking system has improved in recent year as a result of the measures taken to
enhance bank’s commercial orientation and upgrade the banking supervision
system.
The objective of the Council is to achieve a more purposeful and equitable
distribution of bank credit and to bring credit, housing finance and credit to small
borrowers in trade and industry.
In order to ensure that the aggregate credit expansion by commercial does not
exceed the overall limit determined in the Credit Plan, the State Bank prescribes
credit ceiling for individual banks, if it consider it necessary. In case the ceiling is
violated by banks they become liable to penalty by the State bank.

3
Table of contents:

INTRODUCTION AND BACKGROUND............................................................... 6

CREDIT CULTURE.............................................................................................. 7

LENDING IN PAKISTAN...................................................................................... 8

FINANCING FACILITIES OFFERED BY PAKISTANI BANKS........................... 10

NON-FUND BASED FACILITIES...................................................................... 10

RUNNING FINANCE (OVER DRAFT)........................................................... ….11

CASH FINANCE.......................................................................................... …..11

DEMAND FINANCE........................................................................................... 11

BILLS PURCHASED AND DISCOUNTED....................................... ……………11

LITERATURE REVIEW...................................................................................... 12

THE CREDIT FUNCTION................................................................................... 13

CREDIT PLANING IN PAKISTAN................................................................. …..16

FACTORS DETERMINING THE GROWTH AND MIX OF BANK LOANS.. …..21

CREDIT ANALYSIS: WHAT MAKES A GOOD LOAN?.................................... 23

SOURCES OF INFORMATION ABOUT LOAN CUSTOMERS......................... 23

CONSUMER INFORMATION................................................................. ……....24

BUSINESS INFORMATION.............................................................. …………..24

4
GOVERNMENT INFORMATION...................................................................... 24

GENERAL ECONOMIC INFORMATION......................................... ……………24

CONTROLLING LOAN LOSSES.......................................................... ………..27

THE LOAN REVIEW FUNCTION..................................................................... 27

CORRECTING PROBLEM LOANS........................................................ ………28

BORROWER’S FINANCIAL STATEMENTS.......................................... ……...28

INTEREST RATE POLICY..................................................................... ………28

FINANCIAL ASSESSMENT.................................................................. ……….28

LENDING OF BANKS.................................................................................. …..35

PERFORMANCE OF BANKS............................................................................ 43
RECOMMENDATIONS.................................................................... …………….45

5
INTRODUCTION AND BACKGROUND:

The role of commercial banking is to fill the diverse desires of both the borrowers
and lenders in our economy. Banks are financial intermediaries that supply
financial services to surplus and deficit units of the economy. Most of bank’s
assets are financial in nature such as the amount borrowed by households,
businesses, government agencies etc. Banks liabilities are also financial in
nature primarily being the deposits kept by households, businesses, government
agencies etc. The assets and liabilities of a bank are channeled i.e. the liabilities
(major deposits) are used to enhance the bank’s assets. In other words a bank
uses the deposits of the bank to issue loans to households; businesses etc and
earn a return on them. Bank’s also raise capital from the sale of stock or the
accumulation of retained earnings but generally represent a relatively minor
source of funds. (rumelt, 1977 and Anderson and paine, 1975).

Are banks special intermediaries? Do they play any unique role in the economy?
And if so, will they retain their specialty in the ever faster changing world of
finance? The rapid evolution of finance over the last two decades and the
breathtaking ‘e-age’ revolution have persuaded many that, eventually banks will
be indistinguishable from other financial intermediaries since all their functions
can at least be efficiently be carried out by non-banks. (Bossone, 2001).Initially
commercial banks were viewed as a totally separate entity as compared to other
financial and non-financial organizations like investment banks but times have
changed and now commercial banks most obviously have to compete with other
types of banks, financial intermediaries, and with any organization that wishes to
perform the task of filling the diverse desires of surplus and deficit units in the
economy. (Maier, 1963 and Nutt, 1976). Most bankers believe that the defining
business of banking is lending. Recent history has shown how critical it is for
banks to control their risks of lending. Poor loan quality was the main factor in the
growing number of bank failures in our economy. The most basic faults in lending
procedures are

6
1. Inattention to loan policies
2. Overly generous loan terms and lack of clear standards
3. Disregard of the banks own policies
4. Unsafe concentration of credit
5. Poor control over loan personnel
6. Loan growth over the bank’s ability to control quality
7. Poor systems for detecting loan problems
8. Lack of understanding of borrower’s cash needs
9. Out of market lending

Credit Culture:

To overcome their deficiencies in systems and procedures that spawn poor

loans, banks must develop a credit culture supported by well conceived
management strategies for controlling credit risk. The first step is to determine an
appropriate credit culture that is consistent with the business values of the
management team. For a bank to set a correct credit culture a bank must
establish its priorities with respect to the market place. (Brunner et al, 2000)
Priorities may range from long term consistent performance of the loan portfolio
to emphasizing on aggressive loan growth and market share with highly flexible
standards. The first priority is the lower risk one and suggests goals of superior
loan quality with stable earnings and the second set is high risk and suggests
acceptable loan quality with superior earnings. (Wolfgang Hammes, 2000)

7
LENDING IN PAKISTAN:

There has been a phenomenal growth in the level of bank credit over the year.
Bank credit in Pakistan increased rather slowly in the first decade after the
establishment of the state bank.

The primary reason for this was the private sector activity remained rather
limited. While there was undoubtedly considerable potential demand for bank
credit, which the bank did not need in view of their traditional criteria for credit
worthiness, excess liquidity in the economy coupled with various direct controls
and the general economic climate tended to inhibit the demand for bank credit.
However, the situations changed critically in 1959 and bank credit continued to
rise sharply during the third and fourth plan periods.

An important feature reflected in credit data is the expansion of bank credit for
non-seasonal purposes. The general pattern of economic activities in the earlier
years was markedly seasonal with bank credit registering a notable expansion in
the busy season and a subsequent retirement of the same magnitude in the
slack season. The seasonal pattern has now lost its sharp edge owing to the
structure changes in the economy. With the growth of the industrial sector and
the diversification of economic activity, bank credit for non-seasonal purposes
has raised sharply in recent year. The rate of absorption of bank credit in the
economy has consequently increased manifold. Though the seasonal
fluctuations have not disappeared, the fact that a sizeable non- seasonal demand
is superimposed on the seasonal demand has blunted the edge of seasonal
fluctuation. They no longer have the same significance for the banking system
and money market. The busy season extend roughly from September and April
each year.

The increase flow of bank credit in recent year has been widely disturbed among
different sectors of the economy. However, a significant development is the
comparatively flow of bank credit to certain sector, which had a lesser claim on

8
bank resources before 1959. In line with the structural changes in the economy,
the pattern of bank advance has undergone a significant change over the year
and commercial bank have rapidly adapted themselves to the changing credit
requirement of different sector of the economy (Meenai, 1984, p.43)

The comprehensive financial sector reform program introduced in the 1990’s has
largely transformed Pakistan’s financial sector from a inward looking, narrow
based and government controlled regime to an outward looking, market based an
dynamic system. After passing through initial stage of trial and error in earlier
year the market oriented financial system has now achieved considerable
sophistication. Some major objectives to reforms has been achieved whilst
others are being pursued. The financial sector reform program envisages
harnessing the private sector as the engine of growth. Hence, the credit plan
allocated more resources to the private sector then to the government sector for
budgetary support through bank borrowing . Annual average credit to the private
sector therefore, increased by RS. 53.3 billion in the 1990’s, which constituted
52% of M2.

Substantial progress has been made in implementing banking sector reforms in

1990’s. This includes: (I) conduct monitory policy through market based
instrument (2) Interest rate liberalizing and restoration of financial discipline
through prudent lending (3) enhancing the SBP’s authority in banking regulation
and supervision. (4) improving the capital base and management of nationalized
commercial banks (5) Stemming the hemorrhage caused by political motivated
lending (6) curtailing operating losses by reducing over staffing and excessive
number of branches in the nationalized commercial bank (NCBs) and
development finance institutions (DFIs) through staff separation and branch
closure policy and (7) improving transparency through better prudential
regulation and financial disclosure standards. Financial health of the banking
system has improved in recent year as a result of the measures taken to
enhance bank’s commercial orientation and upgrade the banking supervision

9
system. The cleaning up of the bank balance sheet will be further augmented by
the newly established Corporate and Industrial .

Restructuring Corporation (CIRC), whose principal objective is to dispose of the

nationalized commercial bank (NCBs) a non-performing assets through industrial
restructuring, mergers and if necessary liquidation. A plan to restructure and
consolidate DFIs has also been formulated with the view to improving their
financial health, rationalizing commercializing their operations and paving their
way for eventual privatization.

Financing facilities offered by Pakistani Banks:

Pakistani bank offer following financing facilities to its customers:
1. Fund based Facilities
2. Working Capital Finance
3. Trade Finance
4. Agricultural Finance
5. Financing of small Business &Industry
6. Financing of Commodity Operations
7. Housing Finance
8. Consumer Finance
9. Musharika Financing
10. Employment Finance
Non-Fund based Facilities
1. Letter of credit
2. Guarantees

10
Forms of bank advances:
The main types of bank advances are as follows:

Running Finance (Over Draft):

Running finance is a cheque fluctuating account, where in the balance some
times may be in credit and at other times in debit within the currency of limit. It
can be pre arranged for a year or so as well as purely temporary when it is repaid
in the shortest period not exceeding a maximum of six weeks. As per terms
agreed, it is repayable in installments or in lump sum on expiry of limit the mark-
up is chargeable on outstanding balance. Account opening formalities are
required to be completed.

Cash Finance:
Cash Finance is a drawing account against credit granted by Bank and is
operated in exactly the same way as a current does on which a running finance
has been sanctioned. It is cheque account usual account formalities.

Demand Finance:
Demand Finance account is an advance for fixed amount and no debit to the
account may be made subsequent to the initial advance except for mark-up,
insurance premia godown and other sundry charges. As an account credited to
loan account is in reducing the original advance, and further drawing are not
allowed. This is a single transaction, non-chequing account. It ranges for short
period to medium term and long term.

Bills Purchased and Discounted:

Discounted and Purchasing of bills is another form of finance in which the
negotiable installments supported by document of title are given value and fund
are provided to the seller, exporter consignor. This, a single transaction or clean
and can be demand. The banks give value numerous competitive advantages

11
result from a sound forecasting system. Most important among them are the
ability to forecast changes in relevant environmental condition that affect
profitability (e.g. changes in consumer preferences, uncertainty in investment
markets and increased loan competition) and to construct goals and plans
accordingly. Forecasting system are essential when the environment is
undergoing rapid changes, a situation that is descriptive of today’s banking
community (rumelt, 1977 and Anderson and paine, 1975).
The development-forecasting model relies on combining historical and future
data in a logical sequence. As a first step, it is necessary to identify those factor
that influence the forecast. In most bank situation, these factors can be
subdivided into two categories, environmental (external) factors and
management policies (internal) factors.
Second, it is necessary to determine the relative important of these variable. The
third step in the forecasting is to determine which of these factors will change in
the times horizon of the forecasting. The fourth step of the sequence is to
determine the impact of the changes, positive, negative or zero. Finally, this
information is combined and a forecast is generated based on current position,
forecast changes and their associated impact (Maier, 1963 and Nutt, 1976). In
addition to the generated model with five steps that require determination of the
importance and impact of factor influencing the forecast. This determination is
made through a structured group process for eliciting and evaluating ideas
(Janis, 1972) to such document and receives the amount, when the bills mature
from the drawer.

LITERATURE REVIEW:
This chapter consists of literature and studies from books, annual reports,
journals and articles related to the subject of this research.
The specialty of banks has traditionally been traced to the monetary nature of
their (demand) liabilities and to their running the economy’s payment system.
Since the early experience of the deposit-taking institutions of the 19th century,
banks have issued debt instruments that are accepted as means of exchange

12
and payment on the basis of a fiduciary relationship among the agents using
them, and between the agents and the issuing banks.
Supplying transaction and portfolio management services is what defines
banking according to (Fama, 1980), while (Kareken, 1985) emphasizes the
central role of banks in managing the payment system. . (Corrigan, 1982) adds to
these functions the banks two fold role of back up sources of liquidity for all
enterprises in the economy and of transmission belt for monetary policy. Others
have objected that, with the evolution of financial markets and institutions, none
of the above functions is compellingly and exclusively pertinent to banks as such.
In advanced economies, transaction account facilities are supplied by non-
depository (and even non-financial) institutions with access to payment clearing
and settlement systems. Likewise, various other financial and non-financial
entities can provide credit to business, while the backup-source of liquidity
function in times of economic distress is in principle inconsistent with bank
regulations aimed to prevent or forestall bank failures. Finally, where monetary
policy is mainly conducted via open market operations, government security
dealers (even more than banks) may act as transmission belts of monetary policy
signals to the economy.
Research has thus looked for other features that may more specifically
characterize banks as special financial intermediaries.

THE CREDIT FUNCTION:

Diamond (1984) finds a special feature in banks acting as delegated monitors of

borrowers, on behalf of the ultimate lenders (depositors), in the presence of
costly monitoring. Essentially, banks produce a net social benefit by exploiting
scale economies in processing the information involved in monitoring and
enforcing contracts with borrowers. Banks reduce the delegation costs through a

13
sufficient diversification of their loan portfolio. Even if diamond’s results shows
that bank’s specialization in monitoring credit improves social welfare, it does not
prove to hold for banks exclusively, since any kind of intermediary equally
benefits from portfolio diversification. Also, it does not explain why loan contracts
are not replaced by more efficient risk sharing, more complete state-contingent
contracts that reduce asymmetric information (such as equities). What is
characteristic of banks loans is that their value is fixed in nominal terms and
includes collateral requirement clauses as well as costly bankruptcy provisions.
By factoring ex-post information asymmetries and agency costs in the credit-
making process. Gale and Hellwig (1985) show that such contract types, which
they call standard debt contracts (SDCs) are optimal financial agreements.
These, on the one hand, save on the creditor’s cost of monitoring states of nature
throughout the life of the loan and, on the other, give borrowers an incentive to
minimize the risk of default and discourage them from hiding their true business
performance.

The optimality of SDCs suggests a powerful argument to explain why banks have
historically emerged as the first form of financial intermediation virtually
everywhere in the world whenever capitalistic production had taken place.
However, SDC optimality is not robust against changes in the universal risk
neutrality assumption used by Gale and Hellwig in their model, and does not hold
in the case of ex-ante information asymmetries, where SDCs become exposed to
exposed to adverse selection and moral hazard risks. Besides, as information
and contract performance are crucial to the SDC optimality result, one would
expect bank special ness to fade with the development of financial infrastructure,
since this provides agents with better information and more efficient contract
enforcement technologies leading investors to prefer non- SDC contract types
(e.g. equity0 Bank special ness is therefore a product of history, much like its
own disappearance at some point.

Terlizzese (1988) uses the presence of ex-ante asymmetric information as a

rationale for the depositor’s preference to lend indirectly (writing a SDC with a

14
bank) over direct financing of individual entrepreneurs. As depositors are faced
with a ‘lemon’ problem, they generate a demand for delegated screening which
banks have a comparative advantage to perform. In a repeated game situation,
the related agency problem is solved through reputation incentives. Interestingly,
due to the ex-ante information asymmetry, banks should not find it possible to
have depositors agree on deposit contracts contingents on states of nature. This
provides an enlightening explanation for why bank commonly use SDC’s to
finance their assets.

Though the credit function and the associated access to private information,
banks tend to establish long term relationships with fund users, based on mutual
trust and mutually beneficial incentives. Relationships ensure borrowers with a
steady and reliable supply of funding. Even at times of adverse contingencies,
while they generate for the banks safe sources of (quasi-monopolistic) rents. As
relationships consolidate over time, it becomes costly for both parties to exit and
replace them with different counterparties. (Corrigan, 1982) Relationships,
however, are not necessarily a unique feature of banks and can be replicated by
other types of non-bank financial intermediaries, especially those specialized in
term lending.
Evaluation of bank loan applications/ extensions normally revolves around
an 8-phase cycle:
i. Evaluation of the status of the firm’s customer relationship
ii. Evaluation of a new customer relationship
iii. Credit evaluation
iv. Check on legal and policy restrictions
v. Appraisal of the loan’s purpose, amount, maturity, payback and security
vi. Detailed recommendation
vii. Record analysis and recommendation, and
viii. Follow-up review
I want to focus on credit evaluation. Credit investigation is undertaken in
varying degrees depending upon the client’s general reputation, the

15
amount and purpose of the loan, the repayment schedule, and the security
offered. The main concern of the loan officer is to access a loan
applicant’s ability to repay loans in the normal course of business. The
ability to repay is a function of net cash flows. The banker requires
information to assist him in predicting the potential cash flows of the
applicant, his ability to comply with the terms of loan and the risk
associated with the loan. In this research, I want to identify the types of
information required for this purpose

CREDIT PLANING IN PAKISTAN:

Until the introduction of Banking Reforms and the establishment of the National
Credit Consultative Council there was no definite planning undertaken in the
credit field. However, the central banking authority-the State Bank-maintained
close watch on the overall flow of credit and its distribution amongst the various
sectors of the economy. It endeavored to ensure that credit flowed towards the
priority sectors and that its flow towards speculative uses was discouraged. In
later years the situation was sought to be controlled through the introduction of
the concept of a credit budget in 1966 worked out annually in order to ensure that
the credit needs of the priority sectors, particularly those of export trade, were
adequately met.

In pursuance of Banking Reforms of May 1972 a National Credit Consultative

was set up in September 1972 under the aegis of the State Bank of Pakistan.
The objective of the Council is to achieve a more purposeful and equitable
distribution of bank credit and to bring credit, housing finance and credit to small
borrowers in trade and industry.

The Governor, state Bank of Pakistan, is the ex-officio Chairman of the Council.
The member of the Council consists of representative of the Government of
Pakistan, Provincial Government, banks and financial institution and
representatives from the Business, Industry and Agriculture sectors from the

16
private sector. The Council has been provided with a permanent secretariat by
the state bank of Pakistan, which is headed by its Director of Research.

The National Credit Consultative Council is required to discharge the

Following function:
(1)to review the overall credit situation in the country;
(2) to review the region-wise and sector-wise distribution of bank credit
(3) to review the situation regarding concentration of bank credit;

(4) to make recommendation to the government with regard to monetary and

credit expansion within safe limits and distribution of credit among various sector
and regions in conformity with the socioeconomic objective and the priorities and
targets set out in the Annual plans;

(5) to set specific targets for (a) agricultural loans and (b) small loans to be
provided by the commercial banks;

(6) to periodically review the progress in the implementation of its

recommendation and modify or amend its previous recommendation in the light
of the emerging situation.

Before the commencement of each financial year the National Economic Council
determines the credit needs of the various sectors of the economy and draws up
an integrated credit plan within the safe limits of monetary and credit expansion.
After the Annual Plan has been approved and the extent of the budgetary
support required of the banking system that is the limit of deficit financing has
been determined , the National Credit Consultative Council proceeds to allocate
the available credit to various sectors in conformity with the priorities and targets
set in the Annual plan. The Council meets as often as necessary to review the
credit plan and to re-order the allocation in the light of the emerging economic
situation.

17
As mentioned earlier, the National Credit Consultative Council has the
responsibility of drawing up every year an integrated Credit plan for the economy.
The chief purpose of drawing up the Credit Plan is to determine the direction and
magnitude of credit flows in the private sector which would be consistent with the
objective of maintaining monetary stability in the country as also with the
priorities and targets laid down in the Annual Development Plan. For drawing up
the Credit Plan the safe limit of monetary expansion is first worked out on the
basis of the projects growth rate of GNP in real terms as given in the Annual
Development Plan. After the determination of the safe limit of monetary
expansion, the limit up to which total domestic credit expansion can be allowed is
determined by adding or subtracting from the estimated safe limit of monetary
expansion the amount by which the country’s foreign exchange reserves are
expected to fall or rise during the year. Within the total limit of domestic credit
expansion so determined, the credit needs of both the private sector and the
government sector are accommodated. An attempt is made to estimate the credit
need of the various sectors of the economy insofar as private sector is concerned
(including public sector enterprises). These estimate are made on the basis of
investment targets set for various sector in the Annual Development Plan as also
taking into account the related working capital requirement which are worked out
on the basis of certain percentage of value added by then.

After determining the financial needs of the various sectors for investment and
working capital purpose, account is taken of the likely flows of funds from various
sources other than the commercial banks. For example, in the case of
manufacturing sector, account is taken of the likely availability of foreign
resources, sponsor’s equity and local currency loans by specialized institutions
like IDBP and PICIC. The total availability of fund from these sources is then
deducted from the total amount of credit needs determined for this sector in order
to arrive at the extent to which commercial banks would be required to extend
credit to this sector. Such an exercise is undertaken for other sectors as well.
The major sectors, which are covered, include: Agriculture, Manufacturing,

18
Mining and Quarrying, Housing, Transport and Communications, Commerce and
other sector. The source-wise estimate of the availability of finance to various
sectors are notional in nature, and provided guideline for regulation of credit
flows in the economy. However, these estimates contain certain provision
relating to smaller units in various sectors which are obligatory for banks to fulfill.

The formulation of the Credit Plans on the above lines is confined to the credit needs of
various sectors for the country as a whole. In order to ensure that the aggregate
credit expansion by commercial does not exceed the overall limit determined in
the Credit Plan, the State Bank prescribes credit ceiling for individual banks, if it
consider it necessary. In case the ceiling are violated by banks they become
liable to penalty by the State bank. As already mentioned elsewhere, an
important feature of the credit ceiling is that the State bank prescribes separate
credit limits for public sector enterprises and private sector proper to avoid the
possibility of undue absorption of credit by one sector to the detriment of the
other.

To implement the obligatory provision contained in the Credit plan, mandatory

target are set by the sate bank for the commercial banks in respect of small loans
to agriculture, business and industry and low cost housing. These targets are
allocated among individual banks keeping in view their financial position and
other relevant factors. Should any bank fail to reach the targets given to it, it
become liable to penalty in the form of making a interest- free deposit with the
state bank to the extent of the shortfall. Small loans for which mandatory targets
are given to banks are defined follows:

(1) All loans irrespective of the amount provided to (a) industrial units with fixed
assets (excluding land buildings) up to RS. .20 M (b) Construction companies for
low cost housing. Low cost housing are defined ad those where the cost of any
dwelling unit built by a construction company does not exceed RS. 75,000.

(2) Loans up to RS. 1,00,000 provides to small businessmen and firms.

19
(3) Loans up to RS. 5,000 for agriculture production in general and up to RS.
10,000 for sugarcane growers.
(4) Loans up to RS. 75,000 for housing to individual.

The task of bringing about an expansion in the flow of bank credit in the priority
sectors and at the same time keeping the overall credit expansion within safe
limits calls for great ingenuity and effectiveness on the parts of the central banks.
Insofar as the Credit Plan and sector targets are based on the Annual Plan, there
is great need for vigilance and flexibility. Any lack of accuracy and precision in
the Annual Plan. Sometime in the anxiety to reach the target the need for
adopting a simple approach to the problem of credit availability by seeking to
enlarge it gradually for the priority sectors, sometime sophisticated estimate of
the absolute credit needs of specific sectors are attempted by monetary authority
only to find that they can never be accommodated in the overall Credit Plan
without endangering monetary stability. All these factors point to the need for
adopting a caution and flexible approach in formulating and implementing a
Credit for the economy.

While the objective of credit planning are fairly obvious, it would be useful to note
some of its limitations. Based as it is on the Annual Plan for the economy
planning of credit pre-supposes a highly sophisticated and precise Annual
development Plan. Moreover, in order to cope with the demands of an emerging
situation, a constant flow of data in regard to the actual progress of the Plan and
performance of the economy, is required in order to be able to adjusted the
Credit plan accordingly. In the absence of a detailed Credit Plan and specific
allocation, credit used to flow the actual course of economy instead of being pre-
empted on the basis of a certain set of hypotheses and projections. Under the
credit plan, once the claim have been established, beneficiaries find themselves
in a situation where having to justify them on a constant basis. Having without
allocation on the basis of an annual exercise, the central banking authority also
tends to lose the initiative and will to regulate the situation in the short run.
Moreover, as far as the Credit plan is concerned, it is impossible not to take into

20
account the realities of a given situation so that though required to be based on
purely technical and objective consideration, the exercise may well a politically
acceptable or livable situation in a technical framework. Thus the research and
economic policy organization of the central bank may become exposed to direct
pleas resources, which may pose a long-term risk for its technical objectivity and
scientific judgment.

In the absence of reliable data relating to self-financing, an over simplified

quantitative approach to the determination of credit requirement may well lead to
over expansion in certain cases. At the same time it might create frustration in
certain sector as more often than not the credit needs so determined are far in
excess of the credit resources that it is possible to direct towards them within the
safe limits of monetary expansion. Finally, once the Plan is approved, it acquires
a technical force and is deemed to have a mandatory character where the central
bank feels obliged to provided primary reserves without asking question.
Sometimes the central banks may know fully well what the situation requires but
may be forced to act against their there conscience which they may seek to calm
down by either harping from time to time on the fact that the rate of monetary
expansion was excessive or by taking some ad hoc action such as a symbolic
rise in the bank rate.

Factors determining the growth and mix of bank

Loans:

The mix of loans held by any particular bank usually differs quite markedly from
institution to institution, based upon several critical factors. One of the key factors
in shaping an individual bank’s loan portfolio is the profile of characteristics of the
market area it serves. Each bank must respond to the particular demands for
credit arising from customers in its own market. A bank serving a suburban
community with large number of single-family homes and small retail stores will

21
normally have mainly residential real estate loans, automobile loans, credit for
the purchase of home appliances and for meeting household expenses, and
other personal loans in its portfolio. In contrast, a bank situated in a central city
surrounded by office building, department stores, and manufacturing
establishment will typically have the bulk of its loan portfolio devoted to business
loans designed to stock shelves with inventories, purchased computer and other
equipment, and meet payrolls, as well as loans granted to business manager,
lawyer and other professional businessmen and women.

Of course, banks are not totally dependent on the local areas they serve for all
the loans they acquire. They can purchase whole loans or pieces of loans from
other banks---participation—a practice that helps reduce the risk of loss if the
local areas served by the bank incur severe economic problem. However, as we
noted at the outset, a bank is chartered by government authorities primarily to
service selected markets and, as a practical matter, most of its loans application
will come from these areas.

Bank size is also a key factor shaping loan portfolio mix, especially the size of the
bank’s capital, which determines its legal lending limit to a single borrowing
customer. Larger banks typically are wholesale lender, devoting the bulk of their
credit portfolio to large-denomination loans to corporation and other business
firms and to household situated in urban areas. Smaller banks tend to emphasize
retail credit in the form of smaller-denomination home mortgage loans extended
to individual and families, as well as smaller business extend to individuals and
families, as well smaller business loans to farms and ranches.

The experience of management in making different types of loans also shapes a

bank’s loan mix, as does the bank’s official loans policy which prohibits its loan
officers from making certain kinds of loans.

22
CREDIT ANALYSIS: WHAT MAKES A GOOD LOAN?:

The division of the bank responsible for analyzing and making recommendation
on the fate of most application is the Credit Department. Experience has shown
that this department must ask and satisfactorily answer three major question
regarding each loans application:

1. Is the borrower creditworthy, and how do you know?

2. Can the loan agreement be properly structured and documented so that the
bank and its depositors are adequately protected and the customer has a high
probability of being able to service the loan without excessive strain?

3. Can the bank perfect its claim against the assets or earning of the customer
such that, in the event of default, recovery of funds can be made rapidly with low
cost and low risk? .

SOURCES OF INFORMATION ABOUT LOAN

CUSTOMERS:

The bank relies principally on outside information to assess the character,

financial position, and collateral offered by a loan customer. Such an analysis
begins by reviewing information supplied by the borrower in the loan application.
How much is being requested? For what purpose? What other obligation does
the customer have? What assets might be used as collateral to back up the
loan?

The bank will contact other lender to determine their experience with this
customer. Were all scheduled payment in previous loan agreements made on
time? Were deposit balances kept at sufficient levels? In the case of a household
borrower the local or regional credit bureau will be contacted to ascertain the

23
customer’s credit history. How much was SOURCE OF INFORMATION ABOUT
BUSINESS, CONSUMERS AND GOVERNMENT BORROWING MONEY.

CONSUMER INFORMATION:

 Local bureau.
 Customer financial statement.
 Experience of other lender with this customer.

BUSINESS INFORMATION:

 Customer financial statement

 Customer annual reports
 Experience of other lender
 Securities and exchange commission
 Moody’s industrial manual or banking and finance manual
 Standard and Poor’s stock industry surveys
 Standard and Poor’s stock market Encyclopedia
 Business and industrial Ratios

GOVERNMENT INFORMATION:
 Government budget reports
 Credit rating agencies

GENERAL ECONOMIC INFORMATION:

 Chamber of Commerce, Survey of current Business

 International Economic Condition, and Monetary Trends
 The wall street journal

24
  Newsletters published by money center banks
 Local newspapers
 Local chamber of commerce

Borrowed previously and how well were those earlier loans handled? Is there any
evidence of slow or delinquent payment? Has the customer ever declared
bankruptcy?

Most business borrowers of any size carry credit rating on their bonds and other
debt securities and on the firm’s overall credit record. Moody’s and Standard and
Poor’s Corporation assign rating reflecting the probability of default on bonds and
shorter-term notes. Dun and Bradstreet provides overall credit rating for several
thousand corporations. Other firms and organization, such as Robert Morris
Associated, Leo Troy, and Dun and Bradstreet, provide benchmark operating
and financial ratios for whole industries so that the borrower’s particular operating
and financial ratios in any given year can be compared to industry standards.

In the Robert Morris’ Annual Statement Studies, for example, data is submitted
on borrowing customers from loan officers who work in banks that are members
of Robert Morris Associated (RMA), the national association of loan officer. RMA
group and present average (median) values for each operating or financial ratio,
as well as upper and lower quartile values.

In the Almanac of Business and industrial Financial Ratios, prepared annually by

Dr. Leo Troy, Internal Revenue Service data is used to assemble average
operating and financial ratio for firms in different industries and asset-size group.
Twenty two different ratios are presented for each industry. A similar array of
individual firm and industry data is provided by Dun and Bradstreet Credit
services, which maintains more then 1 million financial statements from
corporation, partnerships, and proprietorships in 800 different businesses
lines(indicated by Standard Industrial Calcification, or SIC, codes). An industry
Norm Book, containing data from the most recent year and the past three years,

25
is prepared by Dun and Bradstreet annually and contains 14 key ratio measuring
efficiency, profitability, and solvency.

In evaluating and credit application, the loan officer must look beyond the
customer to the economy of the local area for smaller loan requests and to the
national or even international economy for larger credit requests. Many loan
customer are especially sensitive to the fluctuation in economic activity known as
the business cycle. For example, auto dealers, producers of palm and other
commodities, home builders, and security dealers and brokers face cyclically
sensitive markets for their goods and services. The loan officer and credit analyst
must determine whether the borrower is caught in a economic downturn or
enjoying a period of economic expansion. This does not mean that banks should
not lend to such firms. Rather, they must be aware of the vulnerability of some of
their borrower to cyclical changes is structure loans to take care of such
fluctuations and economic conditions. Moreover, for all business borrower it is
important to develop a forecast of future industry condition. The loan officer must
determine if the customer’s projections for the future conform to the outlook for
the industry and a whole. Any differences in outlook need to be explained or
accounted for before a final decision is made about approving or denying a loan
request.

Loan Function - Principles and Procedures:

The technical requirements of a loan function are as follows.
 Insurance Protection – to protect against destruction of collateral held
against the loan e.g. inventory

 Documentation Standards – A standard documentation checklist should

be Required for eacch credit file.

Standard loan documentation is

1. The basic loan agreement

26
 2. The credit application
3. The borrower’s financial statements
4. Credit reports
5. Evidence of perfection of security interest
6. Assignment of receivables
7. Insurance policies
8. Corporate borrowing resolution or partnership agreement
9. Continuing guarantee
10. Financial statements of the guarantor
11. Correspondence
12. Copies of existing and paid off promissory note

Controlling Loan Losses:

The Loan Review Function:

Banks find that invariably a small portion of their loans become delinquent and
eventually must be written off. This basic risk of lending is not necessarily bad
because when a bank does not experience at least a few such cases, this is
likely to be a sign that that bank is passing up profitable business. Most banks
review loans to control losses and monitor loan quality. Loan review consists of a
periodic audit of the ongoing performance of some or all of the active loans in the
bank’s loan portfolio. Its essence is credit analysis although unlike the credit
analysis conducted by the credit department as part of the loan approval
process, credit analysis of loan review occurs after the loan is on the books. The
following points are emphasized in the loan review:

1. To detect actual or potential problem loans as soon as possible

2. To provide an incentive for loan officers to monitor loans
and to report deterioration in their own loans.
3. To enforce uniform documentation
4. To ensure that loan policies, banking laws and regulations
are followed.

27
5. To inform the management and the board about the overall condition of the
loan portfolio
6. To aid in establishing loan loss reserves.
7. Financial condition and repayment ability of the borrower
8. Completeness of documentation
9. Consistency with the loan policy
10. Perfection of the security interest
11. Apparent profitability

Correcting Problem Loans:

Indicator of trouble is as follows:
1. Disturbing trends in financial statements
2. Management turnover
3. Cancellation of Insurance
4. Security interest filed against borrower by other creditors
5. Notice of a lawsuit, tax liens and other action against the borrower
6. Deteriorating relations with trade suppliers
7. Death or illness of principals
8. Marital difficulties of principals
9. Loss of key source of revenue
10. Deterioration of labor relations
11. Natural disasters
12. Rapid growth

Borrower’s Financial Statements:

Concrete financial statements studied and attested by professional analysts,
CPAs and/or attorneys, should support loans. Interest Rate Policy Interest rates

28
charges on loans potentially depend in one or more of several considerations
such
1. Other banking relationships with the borrower

Inventory Turnover:

Inventory turnover indicates the liquidity of the inventory. This computation is

similar to the receivables computation turnover. The inventory turnover formula
follows:

Computing the average inventory based on the beginning of the year and the end
of the year inventories can be misleading if the company has seasonal
fluctuations or if the company uses natural business year. The solution to the
problem is similar to that used when computing the receivables turnover- that is,
use the monthly balances of inventory. Monthly estimates of inventory are
available for internal analysis, but not for external analysis. Quarterly figures may
be available for external analysis. If adequate information is not available, avoid
comparing a company on natural business year with a company on calendar
year. The company with the natural business year tends to overstate inventory
turnover and therefore, the liquidity of its inventory.

Over time, the difference between the inventory turnover for a firm that uses
LIFO and one that uses a method that results in a higher inventory figure can
become very material. The LIFO firm will have a much lower inventory and
therefore a much higher turnover. Also, it may not be reasonable to compare
firms in different industries.

When you suspect that the inventory turnover does not result in a reasonable
answer because of inventory and / or cost of goods sold dollar figures not being
reasonable, perform the computation using quantities rather than dollars. As with
the day’s sales in inventory, this alternative is feasible only when performing
internal analysis

29
Current Ratio:
Another indicator, the current ratio, determines short term debt paying ability and
is computed as follows:

For many years the guideline for minimum current ratio has been 2.00. currently,
many firms are not successful in staying above a current ratio of 2.00. this
indicates a decline in liquidity of many firms. A comparison with industry average
should be made to determine the typical current ratio for similar firms. In some
industries, a current ratio substantially below 2.00 is adequate, while other
industries require a much larger ratio. In general, the shorter the operating cycle,
the higher the current ratio.

A comparison of the firm’s current ratio with prior periods, and a comparison with
industry averages, will help to determine if the ratio is high or low. The current
ratio is considered to be more indicative of the short term debt paying ability than
the working capital. The current ratio shows the relationship between the size of
the current assets and the size of the current liabilities, making it feasible to
compare the current ratio for instance, between Motorola and Intel.

LIFI inventory can cause major problems with current ratio because of the
understatement of inventory. The result is an understated current ratio. Extreme
caution should be exercised when comparing a firm that uses LIFO and a firm
that uses some other costing method.

Acid Test Ratio (Quick Ratio):

The current ratio evaluates an enterprise’s overall liquidity position,

considering current assets and current liabilities. At times, it is desirable to
access a more immediate position than that indicated by the current ratio. The
acid test (or quick) ratio relates the most liquid assets to current liabilities.

30
Inventory is removed from current assets when computing the acid test ratio.
Some of the reasons for removing inventory are that inventory may be slow
moving or possibly obsolete, and parts of the inventory may have been pledged
for specific creditors. Compute the acid test ratio as follows:
Usually a very immaterial difference occurs between acid test ratios computed
under the first method and this second method. Frequently, the only difference
is the inclusion of prepayments in the first method.
The usual guideline for acid test ratio is 1.00.

PROTOTYPE RISK RATING SYSTEM:

Rating systems are based on both quantitative and qualitative evaluation. The final
decision is based on different attributes, but usually it is not calculated. We show how
an internal rating system in a bank can be organized in order to rate creditors
systematically. Ratings generally apply to obligors and loans for which
underwriting and structuring require judgment. They are produced for business
and institutional loans and counterparties on derivatives transaction, not
consumer loans. Credit decisions for small lending exposures are primarily based
on credit scoring techniques.

The main problem faced by bank is obtaining information about companies that
have not issued traded debt instruments. The data about these companies are
unproven quality and are therefore less reliable, and it can be a challenge to
extract to minimum required to improve the allocation of credit.

The credit analysts in a bank or a rating agency must take into considerations
many attributes of a firm: financial as well as managerial, quantitative as well as
qualitative. The analysts must ascertain the financial health of the firm, and
determine if earning and cash flows are sufficient to cover the debt obligations.
The analysts would also want to analyze the quality of the assets of the firm and
the liquidity of the firm.

31
In addition, the analysts must take into account the features of the industry to
which the potential clients belongs, and the status of the client within its industry.
The effects of macro-economic events on the firm and its industry should also be
considered, as well as the country risk of the borrower. Combined industry and
country factors can by assessed to calculate the correlation between assets for
the purpose of calculating portfolio effects.
A major consideration is providing alone is the existence of a collateral, or
otherwise of alone guarantor, and the quality of the guarantee. This issue of
guarantee is especially important for banks providing loans to small and medium-
sized companies that cannot offer sufficient collateral. When rating borrower one
must decide whether to grade borrowers according to their current condition
(“point-in-time” rating assessment), or their expected creditworthiness over the
life of the loan or the entire cycle (“through-the-cycle” rating assessment). This
decision depends on the objective of the rating system. A long-horizon, through-
the-cycle approach is used when the purpose of the rating system is to assist
lending or investment decision. Loan officers generally consider potential stress
conditions in the lending decision and instructing a transaction (covenants, loans
amount, term, collateral, guarantee) over the life of the loan. This is the
philosophy adopted by rating agencies. It involves estimating the borrower’s
conditions at the worst point in a credit cycle, and grading according to the risk at
that time. It is therefore expected that agencies’ ratings stay stable over the credit
cycle.

Financial assessment: :

If the earning and cash flows are sufficient cover the debt. The credit analyst will
study the degree to which the trends associated with these “financial” are stable
and positive. The credit analyst would also want to analyze the degree to which
the assets are of high quality, and make sure that the obligor has substantial
cash reserve.

32
The analyst would also want to examine the firm’s leverage. Similarly, the credit
analyst would also want to analyze the degree to which the firm had access to
the capital markets, and whether it has an appropriate flexibility to borrower
money.

The rating should reflect the financial position and performance of the company
and its ability to withstand possibly unexpected financial setbacks. This is a key
step in the credit assessment.

Industry benchmarks:
The analysis of the competitive position and operating environment of a firm
helps in assessing its general business risk profile. This leads to the calibration of
the quantitative information drawn from the financial ratio from the firm, using
industry benchmarks. The ratios summarize information on to profitability and
interest coverage of the issuer, on its capital structure. (I.e. leverage), asset,
protection, and cash flows adequacy. The major ratios
considered include:
1. EBIT interest coverage (x)
2. EBITDA interest coverage (x)
3. Funds from operation/total debt (%)
4. Free operating cash flows/total (%)
5. Pre-tax return on capital (%)
6. Operating income/sales (%)
7. LTD/capital (%)
8. Total debt/capitalization (%)

A company with an excellent business can assume more debt then a company
with average business possibilities. For example, a company with an excellent
business position will be able to take on a debt to total capitalization ratio (ratio 8
above) of 50% in order to qualify for rating category A, whereas a company with
only average business possibilities will only be able to take on a debt to total
capitalization ratio of 30% in order to qualify for rating category A.

33
Table 11 provides data on average ratios for risk categories for three overlapping
periods (1992-94, 1993-95, 1994-96). The table indicates that the ordinal nature
of the categories corresponds well, on average, to the financial ratio. For
example, if we examine the EBIT interest coverage ratio (I.e. EBIT divided by
interest expense) the we would observe that the median for the AA credit class
for the 1994 to 1996 period was 11.06 while for the BB it was 2.27. The ratio for
the AA credit class range from a low of 11.06 to a high of 9.67 over the three
(1992-94, 1993-95, 1994-96) three-year overlapping sample periods, while the
ratio for the BB class ranged from 2.07 to 2.27.

34
LENDING OF BANKS:

Followings are the advances of different banks which they advance to

different sectors that show the lending in Pakistan.

2006 2005 2004

Muslim Commercial Bank 198,239 180,323 137,318

National Bank of Pakistan 294,336,000 268,839,000 220,794,000

Prime Bank 21264000 25523000 32124000

Saudi Pak Bank 25487000 19513000 29022000

Standard Chartered Bank 51508000 50215000 29438000

35
Punjab Bank 39439000 63624000 101320000

Muslim Commercial Bank:

36
 200000
180000
160000
140000
120000
East
100000
West
80000 North
60000
40000
20000

0
2006 2005 2004 4th Qtr

National Bank of Pakistan:

37
 300000000

250000000

200000000
East
150000000
West
North
100000000

50000000

0
2006 2005 2004 4th Qtr

Prime Bank:

38
 35000000

30000000

25000000

20000000
East
West
15000000
North
10000000

5000000

0
2006 2005 2004 4th Qtr

Saudi Pak Bank:

39
 30000000

25000000

20000000

East
15000000
West
North
10000000

5000000

0
2006 2005 2004 4th Qtr

Standard Charted Bank:

40
 60000000

50000000

40000000
East
30000000
West
North
20000000

10000000

0
2006 2005 2004 4th Qtr

Punjab Bank:

41
120000000

100000000

80000000
East
60000000
West
North
40000000

20000000

0
2006 2005 2004 4th Qtr

42
Following is the deposit and lending rate for all banks under the regulation of
State Bank of Pakistan, which shows the upward movement in the interest rate

43
Performance of Banks:

The financial sector in Pakistan comprises of commercial banks, foreign banks

development finance institutions (DFIs), micro finance companies (NBFCs)
(leasing companies, investment banks, discount houses, housing finance
companies, venture capital companies, mutual funds), modarabas, stock
exchange and insurance companies. As of 31st December 2005 there were 4
public sector banks, 4 specialized banks, 20 local private commercial banks,
11foreign banks, 7 DFIs and 5 micro finance banks. Bank wise data shows that
the share of the large five banks in the incremental credit has increased from
48.8 percent during July-February FY05 to 55.9 percent during FY06. As a result,
the institutional concentration in lending activities has increased.

This can be attributed to: (1) rising credit to deposit ratio, especially of the private
sector banks and (2) the banks’ response to capital requirements. Specifically,
due to strong sustained credit growth, the average credit to deposit ratio of the
banking industry has increased substantially in the preceding three years. The
number of domestic bank branches, which was 6872 in June 2004, and 7089 in
June 2005 further increased to 7301 in December 2005. The number of foreign
bank branches also increased from 67 in June 2004, to 105 in December 2005
(Table-6.11 and Fig: 7). Due to liberalized branch licensing policy, the branch
network of banks has started increasing. The increase in branch network is
particularly skewed towards private banks. The banks have opened 304 offices
during the period from 01- 04-2005 to 31-03-2006. Due to the instructions for
opening of 20 percent of their branch expansion outside the big cities/Tehsil
Headquarters by the large banks (with network of more than 100 branches) the
reach of the financial services is expanding further and the banking services will
be available to people living in rural/less developed areas. Due to the positive
economic outlook the foreign banks have also started expanding their branch
network. As of 31-03- 2006, the total number of banks/offices in Pakistan is 7501.

44
During the first six months of the current fiscal year, total assets of all the
scheduled banks increased by Rs 299 billion (8.9%) from Rs 3350 billion in June
2005 to Rs 3649 billion in December 2005. During July-March 2005-06, there
was also an increase of Rs 303.9 billion (17.3%) in the net advances of the
scheduled banks, from Rs 1759.6 billion in June 2005 to Rs 2063.5 billion in
March 2006. Scheduled banks’ deposits have increased by Rs 272.9 billion
(11.5%) during July-March 2005-06 or from Rs 2377.5 billion in June 2005 to Rs
2650.4 billion in March 2006. Total investments of all the scheduled banks have
increased by Rs 77.1 billion during the first nine months of the outgoing fiscal
year. In 2005, the banking sector produced impressive results. The year has
been unprecedented in terms of profits. Higher lending rates and increased
demand for private sector credit contributed significantly to the profitability of
banks. The increase in profits has had a positive impact on return on assets and
return on equity of the sector.

As a result of on-going privatization and restructuring drive, majority of public

sector banks have been privatized. In 2005, from the remaining 49 percent
shares of Government in UBL, another 4.22 percent shares were offered to
general public and recently the Government has announced another 10 percent
divestment of UBL shares. IPO for shares of HBL owned by the Government is
under consideration. Further, the government is contemplating to offload its
remaining share holding in public sector banks through the local stock
exchanges. Once this will happen, the percentage of banking sector in the
private hands will increase even further.

45
Recommendations:
Based on the conclusions drawn form the findings of the study, the following
are recommended:

1. In implementing effective credit evaluation, it is necessary that everyone

understands the critical credit evaluation factors. Local banks should devise a
system like a management training program for the new employees which would
enable them to better understand the critical factors in credit evaluation.

2. Banks in general, local as well as foreign should develop or outsource financial

models which would help them to analyze the financial statements of companies
consistently. This would reduce the time factor and also increase the efficiency of
the whole process.

3. Banks in general, local as well as foreign banks should develop or outsource a

model that would determine the credit ratings of a company based on their
financial and subjective data.

4. Banks in general, local as well as foreign should develop or outsource a

financial model that would rate the company based on their financial and
subjective data as well as the fluctuation in the companies stock prices. The
reason being that bank officials should consider that the investors of the
company also have a considerable amount of information as their money is on
stake, thus the stock price movements should also be considered for ratings as
well as future projections.

5. The bank’s policy should emphasize on knowledge and information. The bank
officials in the required department should stay close to their customers in order
to anticipate any future requirements of the company resulting in efficient
servicing from the bank.

6. The bank officials should be abreast of the all the current developments in
financial statement analysis.

46
7. The bank officials should be abreast of all the current developments in the

financial sector and analyze the impact of any significant change

47
BIBLIOGRAPHY:

♦ Elsas, R. Kraahnen, J.P. (1998) Is relationship lending special?

Evidence from credit-file data in Germany. Journal of Banking and
Finance 22. 1283 – 1316
♦ Brunner A. Krahnen J.P Weber M (2000). Information production in
lending relationships: On the role of corporate ratings in commercial
banking. Working paper, CFS, Frankfurt/Main in progress,
♦ Petersen, M.A., Rajan, R.J., (1994). The benefits of lending
relationships: Evidence from small business data. Journal of finance
49, 3 – 37.
♦ Bossone Biagio (2001). Do banks have a future? A study on banking
and finance as we move into the third millennium. Journal of banking
and finance, 2239 – 2276.
♦ Hukku N.V. (1956). Analytical studies of bank deposits. New Delhi:
Allied Publishers Pvt. Ltd.
♦ Nigam, Lall M.B. (1953). Financial Analysis techniques for banking
divisions. Ahmedabad: Indian institute of Management.
♦ Meenai A.S. (1984). Money and Banking in Pakistan. Karachi: Oxford
University Press

48
49