The sick loan portfolio in the banks started to swell as early as the mid-eighties, the same was not publicly acknowledged in the banks' books. Throughout the nineties, huge lending decisions were taken in Islamabad instead of being analysed threadbare in the banks' boardroom by professional bankers. Handpicked persons having no professional background were placed in powerful positions in the banks and development financial institutions (DFIs). Adverse impact of these decisions on the viability of the banking sector was the obvious consequence. The once flourishing banking sector, making a positive contribution to the economic development of the country, turned into economic drain due to massive increase in the non-performing loans (NFLs) portfolio of the then nationalized banks and DFIs.
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