Final answer:
The banking system of Pakistan faced challenges at the time of independence due to the disruptive impact of the partition, the historical financial capital drain to Great Britain, and a shortage of skilled banking personnel.
Step-by-step explanation:
At the time of independence in 1947, Pakistan's banking system faced various challenges that contributed to its backwardness. Three main causes of this backwardness include:
- The partition itself, which created a disruptive impact on the economies of both India and Pakistan. Institutions were divided, many banks' head offices were situated in India and operational branches were in Pakistan, or vice versa, leading to complexities in financial transactions and banking operations.
- A significant drain of financial capital to Great Britain during the British colonial era, which left both India and Pakistan's financial institutions weakened and struggling to establish a strong, independent system post-independence.
- The immediate aftermath of partition revealed a dearth of trained and skilled banking personnel in Pakistan, resulting in operational challenges and limiting the growth and maturity of the banking sector at that time.
These factors played roles in the slow start and challenges faced by the banking system in early independent Pakistan, affecting its ability to facilitate economic growth through credit and lending services.