Evaluations based on internal rating systems can be used by banks’ directors and top management in formulating lending strategies and setting limits to the autonomous granting of loans; they can also be used in loan pricing procedures and to ensure the prompt reporting of any deterioration in borrowers’ positions.
But, it is imperative to understand that any disruption in payment systems can potentially result in as negative repercussions for the economy as its inflationary consequences. This is the reason that SBP, despite not being comfortable to the idea, allowed the government to borrow from the banking system. Nevertheless, this trend needs to be checked in future.