of the banks have been lowered from 58 percent to 41 percent and 35 percent in the next two years and excess labor has been eased out through golden handshake schemes in the three major banks – npb, hbl and ubl. cost – income ratios have therefore fallen from 74 percent to less than 60 percent and administrative costs range between 2. 1 to 3. 2 percent. the stable earning stream from core banking business allows the banks to build up reserves for facing unforeseen contingencies and strengthens their balance sheets. fourth, the accesses to banking services have been broadened to a much wider customer base particularly the middle and lower middle income groups. no country can aspire for sustainable and equitable growth in absence of a strong and healthy middle class. in pakistan, the banking system was intermediating the savings of millions of depositors primarily to fund the fiscal deficit and the losses of the public sector, to meet the working capital of 200 top named companies and to engage in letters of credit for business and international trade. the number of active borrowers was limited to less than half a million at best. by allowing the banking system to offer new products and services such as agriculture credit, sme financing, mortgage loans, automobile leasing, personal loans etc. a new vista has opened up. commercial banks that were always hesitant to channel credit to agriculture sector are now the single most source of agriculture financing. this year almost 1 million households will receive about rs. 100 billion of loans for agriculture. similarly, the khushhali bank, ppaf and other microfinance institutions will reach out to half a million households providing them small unsecured loans ranging between rs. 5, 000 to rs. 25, 000. the beneficiaries of these loans are mainly the landless, the women and other poor classes who never had access to bank financing. salaried classes have also begun to leverage their incomes by receiving personal loans the installments of which are deducted from their monthly pay checks. at least another half a million families have availed of these loans. this broadening of access not only eases the credit constraint faced by a dynamic segment of the population and transfers purchasing power in their hands but also diversifies the risk for the banks and allows them to earn a decent return on their loan products. this enhanced purchasing power in the hands of a large number of families stimulates aggregate demand in the economy, helps in the expansion of production of manufactured goods

from any place in the country thus increasing the efficiency and providing convenience to the customers. the cost of transactions will be reduced significantly once the atm network and on - line banking become firmly entrenched. it is estimated that the average cost of processing a cheque is around rs. 50 while that of atm withdrawal is rs. 15. thus, the cost savings will result in further efficiency of the banking system and increased volume of business. conclusion the above analysis shows that the fundamental reforms carried out in the financial sector have brought about significant changes in the structure, processes, regulation, technology and human resource base of pakistan ’ s banking sector. the reforms have initiated a virtuous cycle of economic growth which is pro - poor. these changes and their future continuation provide the foundation for sustainable growth in the financial sector and the virtuous cycle in economy.