Banking is one of the most sensitive businesses all over the world. Banks play very important role in the economy of a country and Pakistan is no exemption. Banks are custodian to the assets of the general masses. The banking sector influences and facilitates many different but integrated economic activities like mobilization 9of resources), poverty elimination, collection and distribution of public finance.

Pakistan has a well-developed banking system, which consists of a wide variety of institutions ranging from a central bank to commercial banks and to specialized agencies to cater for special requirements of specific sectors. The country started without any worthwhile banking network in 1947 but witnessed phenomenal growth in the first two decades. By 1970, it had acquired a flourishing banking sector.

Nationalization of banks in the seventies was a major upset to domestic banking industry of the country, which changed the whole complexion of this sector. With irrational decision at the top all the commercial banks were made subservient to the political leadership and the bureaucracy. Specialized banking institutions were already working in the public sector. The new accountability paradigm changed the business ethics in the banking industry, and with this change started the disaster. Nationalization of banking industry was accompanied by violent changes in the external value of the rupee.

The commercial banks thus lost their assets management equilibrium, initiative and growth momentum. They ceased to be a business concern and became big bureaucracies. This was accompanied by indiscreet loaning under political pressure. They suffered from three terminal diseases: non-performing loans; higher intermediation cost; and loss of initiative and entrepreneurship. The rise of labour unions and officers associations made life tough and working conditions ugly to honest, dedicated and industrious workers in the realms of domestic banking industry.

The era of nineties was the climax of privatization, deregulation and restructuring in the domestic banking industry and financial institutions. The Muslim Commercial Bank was the first bank to be privatized, followed by the Allied Bank limited, the United Bank Limited and now the Habib Bank Limited. One thing good for that particular period was the recruitment of fresh officers in the domestic banking industry through well thought-out policies of the Banking Council. With the decay of the Banking Council there was flood of insincere, nonprofessional, incompetent candidates directly appointed/ recruited in all the domestic banks of the country.

Many domestic banks have increased their general standards. Ours is the age of plastic money. Internet-based services are constantly increasing the number of ATM machines, either by installing their own machines or making arrangements with other networks. The number of Debit Cards has also been increasing at an unprecedented rate. All the domestic and foreign banks vigorously institutionalized consumer financing in the country and earned handsome profits.

The borrowing by the private sector has also increased which ultimately boosted the profitability of all the domestic banks of the country. In the last three to four years many domestic banks have been suffering from surplus liquidity crisis mainly due to low demand for credit and slowdown of the manufacturing sector in the country.

Almost all the banks are now busy in investing in capital markets to increase their exposure in equities. To stop that risky trend the State Bank of Pakistan issued instructions to follow the Prudential Regulations in letter and spirit and not invest in the capital markets beyond the limits.

Emerging markets: Islamic banking is getting popularity in the country. Many efforts are being made to make it workable in the era of conventional banking. The SBP had initiated the process of converting the conventional banking system into Islamic Banking. Government of Pakistan has initiated a parallel banking strategy of promoting Islamic Banking alongside conventional banking. There is big scope for Islamic and Modaraba Banking system in the country.

B) Consumer financing: Most of the commercial banks have ventured into consumer finance. They provide funds for the purchase of consumer durables, computers, automobiles and even housing. Automobiles are covered either through leasing or auto loans, being undertaken by leasing companies and mobarabas or separate divisions within financial institutions. Housing finance is still mostly confined to two companies, namely House Building Finance Corporation and International Housing Finance Limited.

Habib Bank, ABN AMRO Bank, PICIC Commercial Bank and National Bank of Pakistan are busy in consumer banking. Ours is the age of "Financial Derivatives" and consumer banking is one of them, which has globe market of over US$30 to 35 trillion. Housing Finance is also on the rise and popular mode of consumer financing in the country.

Domestic banking industry: The main purpose of financial and banking organization is to create valuable system by interacting with its environment, customers, constituents, suppliers, technology, competition, economy, government, etc. A valuable system is created by the conversion of available resources i.e. human, financial, physical, and intangible assets into goods and services that fulfill the needs of the customers and save the best interests of the banking and financial organization.

Risk management performs all these diversified but integrated work to achieve maximum out-put. Managing risk is actually managing the organization: planning, organizing, directing, and controlling organization systems and resources to achieve objectives. Managing risk must come from within and act to change the organization and its response to changes in the environment..

b) Quality management: Ours is the age of cutthroat competition, scarcity of resources, technological advancement, integration of financial services, expansion of economic markets and cultural diversity. In these complicated and conflicting financial and economic scenarios the need of TQM in the ranks of domestic banking industry is indispensable.

Areas needing improvements: Internal & External Audits (concept of financial discipline, accountability, good corporate governance, professionalism and impartiality)

* Communications Skills. No ambiguity should be left. Clear and comprehensive instructions

* Transparency in all matters especially in financing

* Aggressive marketing strategies in retail and commercial banking

* Institutionalization of Human Resource Management (best man should be posted to best assignment, refreshing courses, seminar on emerging banking and financial problems etc. etc.).

* Humanistic administration, because human is supreme than any entity.(promotion policies, award & reward) etc. etc. * Research and Development facilities (Domestic market research, economic analysis, strategic insight of major economic and financial accords, international markets knowledge, rigorous planning and development, loss & prevention mechanism) * There should be central compliant cell in every bank in the country in order to reduce people's complaints and foster the ratios of productivity. * Commonness of E-commerce and Internet bank should allow flourishing in the domestic banking industry of the country.

* Scope of Investment Banking is very much there and bright as said by finance minister of the country. Concrete efforts should be made to initiate investment-banking operations in the region.

* Money laundering and white-collar crimes are on the rampant. Aggressive and comprehensive mechanism should be set-up to save the domestic banking industry of the country.

* General working conditions ought to be improved.