Pakistan Institute of Development Economics

Banking Finance and Economic Growth
P & R Vol.1 Issue 3
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Banking Finance and Economic Growth – P & R Vol.1 Issue 3

Publication Year : 2020
Author: Abdul Khaliq

Key Questions What role do our banks play in our economy? Are they merely bankers to the government? How do we get more consumed and investment focus? Are deposit coming from the poor areas and going to rich areas? Are they helping or slowing down technology adaptation and digitizing payments? Banking system plays a pivotal role in human resource building and economic development. If the banking system is not well organized and efficient, it creates obstacles and instabilities in economic growth and development. In the past, foreign banks in Pakistan had an important role as they were allowed to operate at the time of nationalization. Foreign banks had three factors that gave an edge over Pakistani banking system: delegation of authority, they promoted training and skills and followed the merit. When we privatized our banking sector, a lot of foreign banks exited and our local banks selected a plethora of people from the pool of foreign banks which were appropriate in terms of delegation of authority, perception of merit, and in terms of training. At present, our banking system faces serious hurdles in attracting talent both domestically and overseas for the public sector banks as well as for the private sector. In the context of public sector banks, the question is, why does this sector have to face difficulty in attracting the talented people? The answer may be the governance standards which impacted the ability to choose the right team, it means, there is more bureaucracy in it. The issues in the public sector are harassed by the NAB, FIA, the judicial activism all these things create maladjustments to attract and retain the talent in public sector banking.