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Classification of banks in Pakistan

BANK
"Bank is an institution which deals in money. It accepts deposits from its clients having
surplus money and make loans to the lender. It accepts deposits at low rate of interest
and lend it at high rate to earn profits

Classification of Banks:
Banks can be classified into various types on the basis of their functions, ownership,
domicile, status, etc. The main types of banks currently working in Pakistan are as under:

On The Basis of Functions

Industrial Bank:
Industrial banks are those which meet the long-term credit needs of
industries in order to foster industrial growth.

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Classification of banks in Pakistan

Functions:

Granting loans to set up new companies


Long term loans for machinery and construction of building
Infrastructure building
Entrepreneur Development
Short term loan for purchase of raw material and payment of daily expenses.

Examples:
National Development Finance Corporation (NDFC)
Industrial Development Bank of Pakistan, (IDBP)

Agricultural Bank:
Agriculture banks are set up to provide financial assistance to the
agriculturists and agro-based industries. Agricultural banks provide long-term, mediumterm and short-term finance to agriculture sector. The bank is responsible for the
development of agriculture sector of the country.

Functions:

Providing long term advances for buying tractors etc.


Short term loan for purchasing seeds and fertilizers
Introducing modern techniques in farming
Making awareness in farmers by seminars
Medium term loans for construction of tube wells

Examples:
Zarai Taraqiati Bank of Pakistan (ZTBL)

Exchange Bank:
Exchange banks are mainly deal with international trade. The exchange
banks are those specialized banks which carry on foreign exchange business. These
banks takes the responsibility of settlement of foreign exchange and arrange the foreign
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Classification of banks in Pakistan

businesses. Exchange banks purchase, sell and collect foreign bills, issue letter of credit
etc.

Functions:

Currency exchange
Providing information for international business
Providing finance for international business
Bank drafts and Bill of exchange
Issue Letter of credit

Examples:
Grindlays Bank Ltd
Standard Chartered Bank Ltd

Saving Bank:

The banks are established for encouraging and collecting


savings of people. Saving banks are not banks in the real sense
of term. They only provide saving facility. These banks usually invest their funds in
Government securities. Commercial banks are also providing the service of saving banks
in Pakistan.

Functions:
It takes deposits from the public and lands the collected funds to traders
Investing the money of people in safe means of investment
Promoting the thrift or saving habits among the people of small incomes.

Examples:
The post office saving bank

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Classification of banks in Pakistan

Mortgage Bank:
Mortgage banks provide long-term loan against the mortgage of
agricultural lands, houses and other such immovable property
building.

Functions:
Provide long-term loan against the mortgage of immovable property
Generally, credit is given to the agriculturist, small industries or house builders
The period of loan usually ranges between 15 to 30 years

Examples:
House Building Finance Corporation

Islamic Bank:
The primary objective of establishing Islamic bank all over the world is to
promote, foster and develop the application of Islamic principles, law and
tradition to the transaction of financial, banking and related business affairs and
to promote investment companies, enterprises and concerns which shall
themselves be engaged in business as are acceptable and consistent with Islamic
principles, law and traditions.

Functions:
To offer contemporary financial services in conformity with Islamic Shariah
To contribute towards economic development and prosperity within the
principles of Islamic justice
To facilitate efficient allocation of resources
To help achieving stability in the economy

Examples:
Bank Islami Pakistan Limited
Dubai Islamic Bank Pakistan limited
Dawood Islamic Bank Limited
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Classification of banks in Pakistan

Micro-finance bank:
The main objectives of micro-finance banks is to provide small loans to
small traders, the loans are granted for short-term and medium terms.

Functions:
Small microfinance loans give people the opportunity to generate enough income
to pay for necessities such as food, shelter and basic medical needs
To minimize gap between classes
It helps in stimulating local economic growth

Examples:

Khush-hali bank Limited


Tameer Micro Finance Bank Limited
Pak Oman Microfinance Bank Limited
The First Micro Finance Bank Limited

Co-operative bank:
The banks which are established and controlled under Co-operative Societies
Act are called co-operative banks. In Pakistan these banks are set up under the Co-operative
Society Act 1925.

Functions
These banks are very essential for improving the conditions of rural agriculturists
and small producers.
They are not profit making institutions.
To finance co-operative societies

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Classification of banks in Pakistan

Examples:
The Federal Co-operative bank Ltd.
Baluchistan Co-operative Bank Ltd.
KPK Provincial Co-operative Ltd.

Foreign banks:
The banks which have their origin and head offices in the foreign country are
called foreign banks. Foreign banks are the branches of the banks incorporated abroad.

Functions:
Foreign bank helps people and businesses engage in international
trade and finance
Foreign banks lower transaction costs by reducing information costs,
lowering the risk of investments, and increasing the liquidity of
financial markets

Examples:
The Standard Chartered Bank Ltd
ABN-AMRO Bank
Barclays Bank

References:

http://notesforpakistan.blogspot.com/2009/08/bank-and-its-types.html
http://www.business-science-articles.com/articles/business/102-banking-and-its-classifications
http://banking-pakistan.blogspot.com/2010/02/types-of-bank-in-pakistan.html
http://www.magmedianews.com/best-10-investment-banks-in-pakistan

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