Meaning of Privatization:
Privatization is the general process of involving, the private sector in the ownership or operation of a state owned enterprise. Privatization includes the following three sets of measures.
(i) Transferring ownership of public enterprises either fully or partially to private enterprises.
(ii) Injecting the spirit of commercialization in public sector enterprises through the grant of autonomy in decision making provision of incentives for workers etc.
(iii) Contracting and the public enterprises for a certain period of private enterprises.
Why privatization of banks?
The Government of Pakistan is not at all satisfied with the performance of nationalized banks. The areas which are severely criticised are the falling standard of banking service. The complaint about the services like delay in home remittances, despatch of cheques, drafts, inefficient counter services overstaffing bad debts militant unionism of the banks, number of bad debts, etc., are on the increase.
The Government, therefore, decided to privatize the banks. A Privatization Commission was set up on January 22, 1991. The Commission has transferred two banks namely MCB and ABL to the private sector. The Allied Bank has been divested to the Allied Management Group formed by the workers of the Bank. The Government has also off-loaded its 51% stake in HBL through bidding.
Process of privatization.
The process of privatization of banks and DFI s are going on at a fast speed since the privatization of HBL in 2004 Shares of National Bank were also offered to the people through local stock exchanges. The management of ABL was formally handed over to them on August 20, 2004 UBL shares have also been off d to the public through local stock exchanges in June 2005. As a result of privatization ore than 30% of the banking assets are now owned and managed by the private sector. The government is also in the process of reconstructing of IDBP, ZTBL and SME bank for their ultimate privatization The strict enforcement of prudential regulations by the SBP has improved the efficiency and profitability of the banking sector. The ratio of non performing loans to total advances has come down to less than 5% A good achievement no doubt.
New Banks in the Private Sector
The government approved and permitted the establishment of 15 new private banks.
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