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       THE gap is huge, to say the least. And those who own Pakistani banks, and the bankers who work for them, do not seem to be cognisant of — let alone prepared for — the challenges being unleashed by rapid tech disruptions led by the emergence of AI. Not that they do not see what is coming — it is just that the banking model that makes them colossal profits through risk-free lending to the sovereign or a few scores of large corporations has made them complacent. But for how long can they survive by sticking to this model, and refusing to adjust to new socioeconomic realities?

       While industry leaders focused on the massive tax burden of 54pc on the banks and the billions of rupees taken from them by the FBR in the name of windfall levy at the recent Pakistan Banking Summit in Karachi, others kept reminding them how destructive it could be for the banking industry to delay the adoption of digital technology and AI, as well as investments in human resource, infrastructure, and product development to meet future demands. The way we do banking today will not exist in the next 10 years, and only those will survive who are capable of adopting new technologies.

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       There is no doubt that the banking industry has transitioned massively from being a heavily state-controlled sector to a privately owned business in the last three-and-a-half decades. Since then, this sector has grown phenomenally, helped governments finance their deficits, invested in digital space in line with the increase in the use of smartphones and mobile apps, and so on.

       However, at the same time, the profit-oriented bankers have ignored various sectors of the economy, including smallholder farmers, housing, small businesses, women, and others who do not have collateral to pledge for a loan. Thus, a very large portion of rural and even lower-income urban populations remain outside the financial system and are dependent on expensive informal channels for funding needs. The way the banking sector has been restructured in the last few decades has come under scrutiny in recent years because of the failure to support the growth of those sectors of the economy that needed their help.

       Indeed, the summit touched upon all these issues along with the challenges of future tech disruptions. But a conference or two is not enough to deal with all these problems. It is crucial for the central bank to engage with industry on a regular and proactive basis to help it navigate new and old obstacles to ensure that banks play an invigorating role in the growth and development of hitherto ignored sectors of the economy. Conferences can only underline the issues; they cannot tackle them.

       Published in Dawn, February 27th, 2025