Pakistani banks liquidity and lending problems

Abstract

This study analyzed the situation of liquidity in banks and the problems in lending faced by the banks. The researcher intended to gain a better understanding of the problem and looked into it using various sources of information. The study also attempted to give recommendations as to what the possible solutions to this situation could be. The researcher went over previous literature related to the subject and gained various data on the mechanics of such situations. In order to further the study, the researcher framed various research questions, delving further into the roots of this situation. The researcher also called upon the help of a few senior bankers and economists, in order to better understand the problem. The insights of these unstructured interviews were recorded by the researcher for later incorporation into the thesis. The results reveal that there is a liquidity surplus in the economy and it is caused in part by problems in lending. Also, among major reasons for this liquidity surplus and problems in lending were inefficient government policies, lack of investment incentive and security.