Impact of Financial Liberalisation and Deregulation on Banking Sector in Pakistan 

2010:64
JEL Classification : E-51, E-58
Publication Year : 2010

The study analyses market perception about the performance of Pakistani commercial banks due to financial liberalisation and deregulation measures taken by the central bank over the last two decades. For this purpose, it uses Survey approach. To augment the results of Survey Based Approach, it employs Distribution Free Approach to measure relative cost inefficiencies of commercial banks. Out of 35 commercial banks, 15 banks have been chosen for analysis purpose. Key banking reforms remain helpful in correcting flaws in the banking sector of Pakistan. In particular, privatisation of banks, the deregulation and institutional strengthening measures and switching towards market-based monetary and credit management remain helpful in correcting the prevailing flaws. The cost inefficiency scores of banks also indicate that the efficiency of Pakistani banks have improved during 1990 to 2006.