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on, which deals with money and credit. It accepts deposits from individuals, firs and companies at a low rate of interest and gives at a higher rate of interest and gives at a higher rate of interest to those who need them. The difference between the terms at which it borrows and those at which it lends from the source of it profit. A bank, thus, is a profit earning institution.

Importance of Banking

Banks play very important role in the economic life of a nation. The growth of economy is dependent upon the soundness of its banking system. Although banks do not create new wealth but borrow, exchange and consume. These make generation of wealth. In this way they become most effective partners in the development of that country.

To encourage the habit of saving and to mobilize these savings is its basic purpose. Banks deposit surplus from the public and then advances these surpluses in the form of loans to the industrials, agriculturists, businessmen, and unemployed people under different schemes so that they set up their own business thus banks help in capital formation.

If there are no banks, ten there would e concentration of wealth in few hands and great portion of wealth of a country would be idle in the fewer developing countries rate of saving is very low and due to this, rate of investment and rate of growth is also very low. We can bank just like heart. In the economic structure and capital provided by it is like blood in it. As long as the blood is in circulation, the organs will remain sound the healthy. If the blood were not provided to any organ the organ would become useless. So, if finance is not provided to agriculture sector or top industrial sector it will be destroyed.

Loan facility provided by bank works as an incentive to the producer to increase production. Banks provide transfer of payment facility, which is cheaper, quicker, and safe. Many difficulties in the international payment have been over come and volume of transaction has been increased. These facilities are very much helpful for the development of trade and commerce.

Evolution in Indo-Pak Subcontinent

The Indian Society was quite familiar with the banking, right from the beginning. There is also sufficient evidence to show that fifth country people were accustomed to use hounds a credit investment. Loans were given top the people against personal and other securities such as ornaments, goods and other immovable properties.

Commercial Banking in Pakistan

It was very difficult for Pakistan to establish its own baking system-immediately after independence with out resources. Following the announcement of the partition plan in June 1947 there was a haste movement on the part of the banks to transfer their funds and accounts across their orders. The banks having their registered offices in Pakistan were transferred to India. In an effort to bring about collapse of the new state by the persecuting and international policy of with drawl, the Indian bank offices closed quickly. Those banks, which stayed, were considering the winding up of their business. By the 30th June 1948 the number of scheduled banks in Pakistan declined from mere scratch.

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