yaseen anwar : brief overview of pakistan ’ s banking sector and innovative banking practices speech by mr yaseen anwar, governor of the state bank of pakistan, at bahria university convocation, karachi, 22 december 2014. * * * vice chancellor, bahria university, prof …. ….. distinguished faculty members, dear students, ladies and gentleman, i would like to thank bahria university for inviting me to this convocation. first of all, let me congratulate all position holders and students who have earned their distinctions and university degrees through sheer willpower, hard work and dedication. your education has provided you with the resources to lead and change. you should be determined to create your own individual voice upholding the values of creativity championed by this institution, while acknowledging your link with the community. the importance of education cannot be overemphasized. education is fundamental to any society ’ s progress for it prepares generations to equip themselves with the knowledge and skills to meet the challenges of the ever changing world. when education blends with youthful energy, it organizes people economically, socially and politically, which helps the society to step - up on the ladder of civilization. education is the catalyst of national development ; it is what distinguishes nations form one another. pakistan has immense human potential. more than half of our population is below the age of 25 ; sadly the education systems aren ’ t appropriately managed and sufficient enough to exploit this potential. this is where institutions such as bahria university and the rest of private sector can play their role to ameliorate current educational level. to increase the pace of economic development, our policies must be focused towards advancement of education. for a stronger, respected and flourishing pakistan, we must in our capacity address the issues related to education. taking benefit of this opportunity, i would like to share my thoughts on the state of banking sector and the need for adopting innovative banking practices from around the world to deliver better customer value and financial inclusion in pakistan. in recent years, growth and turnaround in pakistan ’ s banking sector has been remarkable and unprecedented. classified as pakistan ’ s and region ’ s best performing sector, the banking industry ’ s assets have risen to over us $ 97 billion with profitability of rs 187 billion ( pre - tax ) in fy12 which is exceptional and at an all - time high. similarly, during fy 2012 deposits have grown at a fast clip of 17 percent which is the highest in

opportunities for real structural changes. this has been recognized by the international raters and is also reflected in growing investor confidence as evident from the growing remittances, foreign investment and in the pricing of international sovereign bond issues. these issues were oversubscribed in the us, europe and far east financial markets that now have an appetite to take long term view and risks on pakistan. confidence in the economy was restored as the government succeeded in reducing substantially its macroeconomic imbalances in fy2003 - 04 which had reached unsustainable levels in the late 1990s. fiscal prudence and external debt restructuring together helped pakistan reduce its debt / gdp which is currently down to 56 % of gdp below the target of 60 % to be reached in 2013 defined in the fiscal responsibility act, 2005. recent demand pressures stemming from a combination of factors ( i ) the hike in international oil prices, ( ii ) unanticipated costs of reconstruction of earthquake hit region, ( iii ) real increase in development spending of physical and social infrastructure that has been for years neglected and ( iv ) import requirements of fast expanding industry. these factors together strained the external and fiscal deficit that rose to 3. 9 % and 4 % of gdp, respectively in fy06. while these deficits have been financed properly as government ’ s realization of tax collection and external debt flows were supplemented by significant growth in non debt foreign inflows following the sale of state assets and fdi. heightened business activity coupled with aggressive growth in financial industry prompted an unprecedented rise in private credit, stimulated not only by corporate sector but also by growth in agriculture, sme and consumer financing. the demand pressures from both public and private sector manifested themselves in rising inflationary pressures in the first half of 2005. recognizing the lingering impact of past few years ’ easy monetary policy and the emergent demand pressures, the central bank now for almost 18 months has adopted a tight monetary policy stance. combination of rise in policy discount rate twice, rise in reserve ratios and proactive open market operations together have helped effective liquidity management. inflationary pressures have come down significantly. most distinct is the decline in core inflation though food prices have been volatile largely because of distributional disruptions. maintenance of price stability calls for retaining tight monetary policy. the government plans to finance its domestic and external current deficit from the non debt flows which have been buoyant given the strong international interest in pakistan from all parts including oil exporting gulf countries. pakistan is