Presented by: M.

Ibrahim(1194) Adnan manzoor(1179) Syed ali raza naqvi(1232)

Presented to: Prof.AZMAT

STATE BANK OF PAKISTAN

The State Bank of Pakistan (SBP) 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

ROLE of SBP in economy of Pakistan

 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".(that is the role state bank is being playing for our economy).

Traditional and developmental functions of SBP

 The State Bank of Pakistan also performs both the traditional and developmental functions to achieve macroeconomic goals. The traditional functions, may be cassified into two groups:
1.

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.

2.

Continued
 The non-traditional or promotional

functions, performed by the State Bank include development of financial framework, institutionalization 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.

State bank with banking of Pakistan

 The Stat 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;
1. 2. 3. 4. 5. 6. 7.

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. Banking Sector Supervision in Pakistan Micro Finance Small Medium Enterprises (SMEs) SBP.Scheme for Agricultural Financing Opening of Foreign Currency Accounts with Banks in Pakistan under new scheme.

Overview of Islamic banking in Pakistan.

Commission for Transformation of Financial System (CTFS) was constituted in January 2000 in the State Bank of Pakistan. It introduced Shariah compliant modes of financing which included creating legal infrastructures conductive for working of Islamic financial system, launching a massive education and training program for bankers and their clients and an effective through media for the general public to create awareness about the Islamic financial system. It also dealt with major products of banks and financial institution , both for assets and liabilities side

ISLAMIC banking with SBP.

In September 2001 it was decided by Government that the shift to interest free economy would be made in a gradual and phased manner and without causing any disruptions and was also agreed that state bank Pakistan would consider for: Setting up subsidiaries by the commercial banks for the purpose of conducting Shariah compliant transactions Specifying branches by the commercial banks exclusively dealing in Islamic products, and Setting up new full-fledged commercial banks to carry out exclusively banking business based on proposed Islamic products. In January, 2002 State Bank of Pakistan gave first Islamic Banking License to Meezan Bank Ltd.

Present state of Pakistan islamic banking

The progress of Islamic Banking in Pakistan has been commendable during the last two years. There is huge appetite for Islamic financial services . the growth, is however, constrained by the lack of infrastructure support & dearth of professional islamic bankers.

CONTINUED

Currently, there are 6 licensed full fledged (4 operational) Islamic Banks with 40 branches 10 conventional banks with standalone Islamic Banking Branches with the total branch network of 35 branches operating in thirteen cities of all the four provinces in the country (as of 31 March 2005) Applications for a few more banks are under consideration. The central bank is pursuing a three-pronged strategy to promote Islamic Banking in Pakistan Establishing full-fledged Islamic banks in the private sector; setting up of subsidiaries by the existing commercial banks; and allowing stand-alone branches for Islamic banking by the existing Commercial banks.

Regulation of islamic capital & money market

Currently, Islamic Banking Sector operates under the existing laws & regulation for banks The State Bank of Pakistan (SBP) established the Islamic Banking department on 15 September 2003. The Department was given the task of promoting & developing the Shariah Compliant Islamic Banking as a parallel & compatible banking system in the country.

Currently, the Islamic Banking Department (IBD) consists of the following three divisions Policy Division Shariah Compliance Division Business Support Division

To regulate & supervise the Islamic Banking Sector SBP is working on the areas of Risk Management, Corporate Governance, Prudential Regulations, Accounting & Shariah Standards etc. A Shariah Board is also in place at the State Bank of Pakistan, having experts to guide the Islamic banking industry.

FUTURE PROSPECTS.
The Government of Pakistan intends to continue promoting Islamic Banking in the country while keeping in view its linkages with the global economy & existing commitments to local & foreign investors There is a great need to develop instruments for liquidity management by banks & monetary management by the SBP. The pace of Islamization of the financial system will crucially depend on the development of Shariah compliant instruments to be used for government transactions There is need for innovative products i.e., development of financial instruments on the basis of Musharika, Mudaraba, Leasing, & Salam related to wide spectrum of maturities, projects & issuing entities