or on - line branches of banks has been quite significant so far and it is expected that by 2005 almost all the bank branches will be on - line or automated. utility bills payment and remittances would be handled through atms, kiosks or personal computers reducing both time and cost. ( xvi ) human resources : the banks have recently embarked on merit - based recruitment to build up their human resource base - an area which has been neglected so far. the private banks have taken lead in this respect by holding competitive examinations, interviews and selecting the most qualified candidates. the era of appointment on the basis of sifarish and nepotism has almost come to an end as the private owners want to attract and retain the best available talent which can maximize their profits. this new generation of bankers will usher in a culture of professionalism and rigour in the banking industry and produce bankers of stature who will provide leadership in the future. ( xvii ) credit rating : to facilitate the depositors to make informed judgments about placing their savings with the banks, it has been made mandatory for all banks to get themselves evaluated by credit rating agencies. these ratings are then disclosed to the general public by the sbp and also disseminated to the chambers of commerce and trade bodies. such public disclosure will allow the depositors to choose between various banks. for example, those who wish to get higher return may opt for banks with b or c rating. but those who want to play safe may decide to stick with only aaa or aa rated banks. ( xviii ) supervision and regulatory capacity : the banking supervision and regulatory capacity of the central bank has been strengthened. merit - based recruitment, competency - enhancing training, performance - linked promotion, technology - driven process, induction of skilled human resources and greater emphasis on values such as integrity, trust, team work have brought about a structural transformation in the character of the institution. the responsibility for supervision of non - bank finance companies has been separated and transferred to securities exchange commission. the sbp itself has been divided into two parts - one looking after central banking and the other after retail banking for the government. ( xix ) payment systems : finally, the country ’ s payment system infrastructure is being strengthened to provide convenience in transfer of payments to the customers. the real - time gross settlement ( rtgs ) system will process large value and critical transactions on real time while electronic clearing systems will be established in all cities. these reforms will go a long way in

further strengthening the banking sector but a vigilant supervisory regime by the state bank will help steer the future direction. outcomes : what have been the results of the above reforms? we have been working for the last five years to decrease the lending rates to the extent that middle and low - income professionals, who have no other source than their monthly income, may get a home or a car on installments from the banks. if he / she is a small entrepreneur he / she can get loans from sme. agriculture, the largest sector of economy, which the commercial banks had neglected, has now begun to receive large allocations. the commercial banks are giving more agriculture loans than the ztbl. if this trend persists, the rural households will be able to intensify the use of modern inputs and raise their productivity and income. credit cards, debit cards, personal loans and consumer durable loans are catching up fast. refrigerators, air conditioners, vcrs, televisions are now available on credit. the consumers are forced to save when a specific amount is cut from their salary every month to pay the installment. mortgage financing is one way in which wealth is created. for example, you bought an apartment for rs. 100, 000 and paid rs. 20, 000 as equity and borrowed rs. 80, 000 from the bank. next year, let us say that the value of the same apartment rises to rs. 120, 000 / -. your loan is still rs. 80, 000, but your own equity has now doubled from rs. 20, 000 to rs. 40, 000. in this way, growth of the middle class wealth takes place through judicious use of bank credit. as the lending rates have come down drastically from 21 % to 5 % the banks find it profitable to extend the customer base for mortgage and auto loans, agriculture credit, small business and consumers. for the first time in the history of pakistan, the middle class is beginning to benefit from the banking system. before these reforms only 400, 000 farmers used to get loans from the agriculture development bank, but this year, more than one million farmers have been granted loans by the banking system. for the poor, who don ’ t have anything to mortgage, we have established microfinance banks where no collateral is required. they can get up to rs. 20 - 25 thousand in micro loans. many people have availed this opportunity, some bought a cow, some bought a milch buffalo