Final answer:
The backwardness of Pakistan's banking system at independence was due to lack of infrastructure, the uneven division of assets post-partition, and initial political turmoil, which left the country with limited banking services and expertise.
Step-by-step explanation:
The backwards banking system of Pakistan at the time of independence can be attributed to three main causes:
- Lack of established financial infrastructure due to centuries of colonial rule, where the British prioritized their own financial interests, leading to a drain of financial capital from the region.
- The partition of British India led to a division of assets and liabilities that disadvantaged Pakistan, particularly in terms of banking institutions and management expertise.
- Initial instability and political turmoil post-independence adversely affected the development of a sound banking sector, leading to issues in establishing a stable currency exchange system.
Pakistan inherited a banking system with limited coverage, inadequate services, and a lack of skilled professionals to operate and grow the sector effectively.