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Performance of foreign banks in Pakistan.

As on June 30, 1990, there were 20 foreign banks in Pakistan. However, as on July 4, 1991 after the BCCI debacle, the number has declined to 19. In table on Page 70 working resulted of 19 banks have been included. Subsequently two more banks including Pan African Bank-Kenyan, privately owned enterprise and Al Baraka Bank were allowed to function in Pakistan. Thus the number of foreign banks has increased to 21 in 1991. Total mobilisation of deposits by foreign banks have registered more than threefold increase up from Rs. 10,689 million in 1983 to Rs. 42,348 million in 1990. The growth of deposits and advances of the foreign banks have been illustrated in the following table.
 Deposits and Advances
 of Foreign Banks
 (Rs. in million)
Year Branches Deposits Advances
1983 59 10,689 7,443
1984 60 11,948 8,310
1985 60 13,750 10,384
1986 62 18,082 13,589
1987 63 23,472 17,297
1988 65 26,346 21,140
1989 66 34,700 22,703
1990 67 42,348 25,548
Source: SBP Annual Report 1989

The deposits of foreign banks as ratio of total deposits increased from 9.98 per cent in 1983 to 17.02 per cent in 1990. The advances of foreign banks as ratio to total advances have also shown an increase from 9.93 per cent in 1983 to 13.94 per cent in 1990. The foreign banks have an edge over Pakistani banks as they have worldwide network and vast experience. Top ten foreign banks according to deposits are as follows:
Name Deposits
Citibank 4722
ANZ Grindlays 3646
American Express 3526
Bank of America 2753
Standard Chartered 2679
Emirates Bank 2329
Faisal Islami 1982
Middle East 1854
Bank of Oman 1610
Deutsche Bank 1474
 A present, there are four American
banks operating in Pakistan. These include
Citibank and Chase which usually avoid
competing with a each other in a single foreign
country. The two British banks consist of
Chartered Bank and Grindlays. The former
started its business in Pakistan in 1863
while the latter began operating in Pakistani
areas in 1883. Grindlays' Bank has 14
branch offices in Pakistan which are doing
brisk business In addition to these, Pakistan
has three European banks which do not
offer any serious competition. Of the five
Middle East banks, one has closed down
and its business has been taken over by
another bank of the same category. Among
the four existing banks was the BCCI which
was, technically speaking, not a Middle
East bank but it was oil-based by origin.
The BCCI has also been closed down and
its three branches is expected to be taken
over by Habib Bank. The plus point of these
Middle East banks is that their top
management largely consists of Pakistani
bankers formerly occupying the post of
senior executives in leading Pakistani
banks. Most of them left the Pakistani banks
after nationalisation and joined their Middle
Eastern counterparts.
 The Pakistani clients are quite well
known to them and thus their utility to the
employers can hardly be over-emphasized.
They have a definite edge over other foreign
banks operating in Pakistan. By offering
tough competition to nationalised
commercial banks, the foreign banks have
contributed much to better standard of
banking service in the country. Foreign
Banks in Pakistan.
 1. American Express Bank Limited
 2. Bank of America
 3. The Bank of Tokyo Limited
 4. The Standard Chartered Bank
 5. Citibank N.A.
 6. Deutsche Bank (Asia)
 7. Algemene Bank Nederland N.V.
 8. ANZ Grindlays Bank p.l.c.
 9. Rupali Bank
 10. Bank of Oman Limited
 11. Emirates Bank International Ltd.
 12. Middle East Bank Limited
 13. Doha Bank
 14. Banque Indosuez
 15. The Chase Manhattan Bank N.A.
 16. The Hongkong and Shanghai
 Banking Corporation
 17. Massraf Faysal al Islami
 18. International Finance Investment
 and Commerce Bank Ltd.
 19. Habib Bank AG.
 Capital requirements of foreign banks
have to be met either from remittances or
retention of profits made in Pakistan under
the Banking Companies Ordinance as
amended in June, 1978. Currently foreign
banks maintain capital of 7-1/2 per cent of
their demand and time liabilities is Rs. 5
million whichever is higher.
 Foreign banks are mainly
concentrating in the field of foreign trade
financing with emphasis on export financing.
All the Euro dollar loan syndication for the
Government of Pakistan have been
managed by foreign banks. In the area of
aircraft financing too, the foreign banks
have played a leading role. In the area of
leasing and hire-purchase, some of the
foreign banks have volunteered to draw
down on their institutional experts to provide
the expertise to make leasing a reality. In
the case of automation and electronic
banking, the foreign banks moved at a
faster pace than the local banks.
 The Government has decided in
principle to allow foreign banks and
professional management to float
Investment Finance Companies (IFCs).
American Express, Grindlays, and BCCI
have already got the approval in 1988. The
sponsors are required to raise at least Rs.
100 million as equity. Except for bar on
raising deposits and issuing of cheque
books these Investment Financing
Companies would perform all the functions
of a commercial bank. This has led to
speculation in the capital market that those
IFCs which develop sound working and
show good performance may be converted
into scheduled banks at a later date.
 The gradual opening up of the financial
sector to foreign banks has increased their
role in the country's economy. Two foreign
managed leasing companies are proving a
success. Others are in the pipeline. Over
the past few years the share of foreign
banks in total deposits and advances has
been rising steadily.
 Pan African Bank
 A branch of the Pan African Bank, a
Kenyan privately owned enterprise has
started functioning in Karachi from the 10th
of this month and the existing bilateral
cooperation between Kenya and Pakistan
will enter a new phase in the realm of
commercial banking. The bank will serve to
enlarge the scope of trade between the two
countries and open new vistas of mutual
economic cooperation. The bank will be
providing financial communication not only
with Kenya but also with the countries of
eastern and southern African region.
 Albaraka Bank
 Albaraka Bank of Bahrain will start
functioning as a commercial bank in
Pakistan, soon for which it is opening its
three branches in the country. The
Government of Pakistan has accorded its
approval to Albaraka investment to operate
as a commercial bank. The bank will open
its first branch at Lahore and later at Karachi
and in other cities. Albaraka Bank would
introduce Islamic banking system in
Pakistan as it was doing its business the
world over on Islamic banking lines.
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Author:Haque, Ansarul
Publication:Economic Review
Date:Oct 1, 1991
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