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Thus, the banks have come to play a dominant and useful role in promoting economic development by- mobilising the financial resources of the community and by making them flow into the desired channels.
The serious capital deficiency in under-developed countries is reflected in the small amount of capital equipment per worker and in limited knowledge, training and scientific advance.
These are serious handicaps in economic development and here the banks can play a useful role: The role of banks in economic development is to remove the deficiency of capital by stimulating savings and investment.
The report said that strong demand from textile and cement sectors had improved gross advances to private sector by 7.3 percent on a quarterly basis and 16.4 percent on a yearly basis despite retirement of credit in chemical and pharmaceutical sectors.
February 28 report of Moody’s on the banking system’s outlook, says, 9.2 percent of gross advances of the country’s banking industry are non-performing loans (NPLs).
During past five year period (2010-16), the NPLs relative to gross advances have declined from 15 to 9 percent.
The country’s banking sector witnessed unprecedented growth after 2001 due to low interest rate and product innovation in consumer financing.
The banking sector plays a critical role in mobilization of savings from households from across the country and placing them at the disposal of entrepreneurs.
Banking sector accounts for around three-fourth of Pakistan’s financial sector.
In this way, they promote the development of agriculture, trade and industry.
It is difficult to see how, in the absence of banks, could small savings be stimulated or even made possible.