State Bank of Pakistan

Infobox Central bank
bank_name_in_local = بینک دولت پاکستان
image_1 = State_bank_of_Pakistan_logo.jpeg|100px
image_title_1 = State Bank of Pakistan
image_2 =
image_title_2 =
headquarters = Karachi, Pakistan
coordinates =
established = 1947
president = Shamshad Akhtar
leader_title = Governor
bank_of = PAK
currency = Pakistani rupee
currency_iso = PKR
reserves =
borrowing_rate =
deposit_rate =
website = [http://www.sbp.org.pk/ www.spb.org.pk]
preceded =
succeeded =
footnotes =

The State Bank of Pakistan (SBP) (Urdu: بینک دولت پاکستان) is the central bank of Pakistan. While its constitution, as originally laid down in the State Bank of Pakistan Order 1948, remained basically unchanged until January 1, 1974, when the bank was nationalized, the scope of its functions was considerably enlarged. The State Bank of Pakistan Act 1956, with subsequent amendments, forms the basis of its operations today. The headquarters are located in the financial capital of Pakistan, Karachi with its second headquarters in the capital, Islamabad.

History

Before independence on 14 August 1947, the Reserve Bank of India (central bank of India) was the central bank for what is now Pakistan. On 30 December 1948 the British Government's commission distributed the Bank of India's reserves between Pakistan and India - 30 percent (750 M gold) for Pakistan and 70 percent for India.

The losses incurred in the transition to independence were taken from Pakistan's share (a total of 230 million). In May, 1948 Muhammad Ali Jinnah (Founder of Pakistan) took steps to establish the State Bank of Pakistan immediately. These were implemented in June 1948, and the State Bank of Pakistan commenced operation on July 1, 1948.

Functions

Under the State Bank of Pakistan Order 1948, the state bank of Pakistan was charged with the duty to "regulate the issue of bank notes and keeping of reserves with a view to securing monetary stability in Pakistan and generally to operate the currency and credit system of the country to its advantage".

A large section of the state bank's duties were widened when the State Bank of Pakistan Act 1956 was introduced. It required the state bank to "regulate the monetary and credit system of Pakistan and to foster its growth in the best national interest with a view to securing monetary stability and fuller utilisation of the country’s productive resources". In February 1994, the State Bank was given full autonomy, during the financial sector reforms.

On January 21, 1997, this autonomy was further strengthened when the government issued three Amendment Ordinances (which were approved by the Parliament in May 1997). Those included were the State Bank of Pakistan Act, 1956, Banking Companies Ordinance, 1962 and Banks Nationalisation Act, 1974. These changes gave full and exclusive authority to the State Bank to regulate the banking sector, to conduct an independent monetary policy and to set limit on government borrowings from the State Bank of Pakistan. The amendments to the Banks Nationalisation Act brought the end of the Pakistan Banking Council (an institution established to look after the affairs of NCBs) and allowed the jobs of the council to be appointed to the Chief Executives, Boards of the Nationalised Commercial Banks (NCBs) and Development Finance Institutions (DFIs). The State Bank having a role in their appointment and removal. The amendments also increased the autonomy and accountability of the chief executives, the Boards of Directors of banks and DFIs.

The State Bank of Pakistan also performs both the traditional and developmental functions to achieve macroeconomic goals. The traditional functions, may be classified into two groups:
# The primary functions including issue of notes, regulation and supervision of the financial system, bankers’ bank, lender of the last resort, banker to Government, and conduct of monetary policy.
# The secondary functions including the agency functions like management of public debt, management of foreign exchange, etc., and other functions like advising the government on policy matters and maintaining close relationships with international financial institutions.

The non-traditional or promotional functions, performed by the State Bank include development of financial framework, institutionalisation of savings and investment, provision of training facilities to bankers, and provision of credit to priority sectors. The State Bank also has been playing an active part in the process of islamisation of the banking system.

Regulation of liquidity

The State Bank of Pakistan has also been entrusted with the responsibility to carry out monetary and credit policy in accordance with Government targets for growth and inflation with the recommendations of the Monetary and Fiscal Policies Co-ordination Board without trying to effect the macroeconomic policy objectives.

The state bank also regulates the volume and the direction of flow of credit to different uses and sectors, the state bank makes use of both direct and indirect instruments of monetary management. During the 1980s, Pakistan embarked upon a program of financial sector reforms, which lead to a number of fundamental changes. Due to these changed the conduct of monetary management which brought about changes to the administrative controls and quantitative restrictions to market based monetary management. A reserve money management programme has been developed, for intermediate target of M2, that would be achieved by observing the desired path of reserve money - the operating target.

State Bank of Pakistan has changed the format and designs of many bank notes which are currentely in circulation in Pakistan. These steps were taken to overcome the problems of fraudulent activities.

Banking

The State Bank of Pakistan looks into a lot of different ranges of banking to deal with the changes in economic climate and different purchasing and buying powers. Here are some of the banking areas that the state bank looks into;

* State Bank’s Shariah Board Approves Essentials and Model Agreements for Islamic Modes of Financing
* Procudure For Submitting Claims With Sbp In Respect of Unclaimed Deposits Surrendered By Banks/Dfis.
* Banking Sector Supervision in Pakistan
* Micro Finance
* Small Medium Enterprises (SMEs)
* Minimum Capital Requirements for Banks
* Remittance Facilities in Pakistan
* Opening of Foreign Currency Accounts with Banks in Pakistan under new scheme.
* Handbok of Corporate Governance
* Guidelines on Risk Management
* Guidelines on Commercial Paper
* Guidelines on Securitization
* SBP.Scheme for Agricultural Financing

Bank Assets and Liabilities

This is a chart of trend of major assets and liabilities reported by scheduled commercial banks to the State Bank of Pakistan with figures in millions of Pakistani Rupees. [http://www.sbp.org.pk/ecodata/deposits.pdf] [http://www.sbp.org.pk/ecodata/advances.pdf] [http://www.sbp.org.pk/ecodata/investments.pdf]

Departments

* Agricultural Credit
* Audit
* Banking Inspection
* Banking Policy
* Banking Supervision
* Corporate Services
* Economic Policy
* Exchange and Debt Management
* Exchange Policy
* Human Resource
* Information System
* Islamic Banking
* Legal Services
* Payment System
* Research
* Statistics
* Real Time Gross Settlement System (RTGS System)
* Small and Medium Enterprises
* Training and Development Department (TDD)

Governor

The principal officer of the SBP is the Governor. During December 2005, the President of Pakistan appointed Dr. Shamshad Aktar as the new Governor of the State Bank for a three year term, to replace Dr. Ishrat Hussain, who retired on December 1, 2005.

Central Board of Directors

# Dr. Shamshad Akhtar Chairperson
# The Secretary Finance Member
# Mr. Khair Mohamed Junejo Member
# Mr. Ehsen Rashid
# Mr. M. Yaqoob Vardag Member
# Mr. Mohsin Aziz Member
# Dr. Wasim Azhar Member
# Mr. Kamran Y. Mirza Member
# Mr. Alman A. Aslam Member
# Mr. Riaz Ahmed Secretary

Trivia

* An image of the Islamabad branch appears on the former five-hundred-rupee banknote.

See also

* Governor of State Bank of Pakistan
* National Bank of Pakistan
* Pakistani rupee

External links

* [http://www.sbp.org.pk/ State Bank of Pakistan]
* [http://www.bloomberg.com/apps/news?pid=10000080&sid=asugL.446bYM&refer=asia Akhtar Named Pakistan's First Female Central Banker (Bloomberg)]
* [http://www.dhartipakistan.com/2006/12/13/pakistan-banking-profitability/ Pakistan rated 3rd in banking profitability 2006]