General Ayub Khan
Mian Nawaz Sharif
Zulfikar Ali Bhutto
None of these options
Pakistan’s financial sector evolved very differently from banks in the developed world. For nearly a year after partition, Pakistan had no central bank. Habib Bank – established in 1941 – filled this gap initially, until the State Bank of Pakistan (SBP) was set up in 1948 under quasi-government ownership. The role of domestic banks was particularly limited at the time, accounting for only 25 of the total 195 bank branches in the country. Therefore, the SBP was initially mandated to develop commercial banking channels, and maintain monetary stability so trade and commerce could flourish in the newly-created state. Subsequently, Habib Bank, Allied Bank and National Bank were amongst the first to start operations with strong support from the central bank.
Commercial banking grew favourably in Pakistan until 1974. Under the nationalisation policy implemented by Zulfikar Ali Bhutto’s government, thirteen banks were brought under full government control, and consolidated into six nationalised banks. The Pakistan Banking Council was set up to monitor nationalised banks, marginalising the SBP’s role as a regulator. These measures were meant to improve lending to prioritised industries. However, while directed lending was viewed favourably at the time, little can be said of the long-term gains that have been achieved.
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