"Comparison of The Credit Policies of The year 1997-2001 And 2002-2009, By The State Bank of Pakistan And Its Impact on The Performance of Banking Sector And The Economy."

Abstract

In this research study an attempt has been made to analyze the impact of the credit control policy by the State Bank of Pakistan during the year 1997 to 2001 and year 2002 to 2009, on the performance of the banking industry and on the overall economy of the country. The key focus of the research is on the financial reforms introduced by the State Bank of Pakistan related to the credit control policy. Credit policy is part of a monetary policy and is a tool to measure of the liquidity position of the banks in the economy. By identifying the dependent variables such as non-performing loans (NPL’s) and profitability of the commercials banks, performance of the banking industry was measured. Impact of the independent variable such a credit policy by SBP on the mentioned dependent variables has been measured and analyzed; and concluded as a result of the study. For the research methodology; qualitative as well as quantitative research has been used but mostly the comparison based study is a secondary research. Interviews were taken from the people related to the field of credit working in State Bank of Pakistan and commercial banks. The insight given by them has been analyzed in relation with the actual impact of the policies on the commercial bank’s and economy. The conclusion drawn is truly generated from the study and of view that when the credit policy was in tight measures, banking performance was better of than the previous years; when the credit policy was expansionary. While, economy has been grew more in terms of development and growth in an open monetary policy era. Hence credit policy played a significant role in the performance of commercials banks and ultimately on the economy of the country as a whole.