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.

Before independence on 14 August 1947, during British colonial regime the Bank of India was the central bank for both India and 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 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 utilization 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 Nationalization 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 Nationalization 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 Nationalized Commercial Banks (NCBs) and Development Finance Institutions

institutionalization of savings and investment. for intermediate target of M2. bankers’ bank. 2. A reserve money management program has been developed. 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. etc.. The State Bank also has been playing an active part in the process of Islamisation of the banking system. management of foreign exchange. During the 1980s. The traditional functions may be classified into two groups: 1. 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 primary functions including issue of notes. provision of training facilities to bankers. The State Bank of Pakistan also performs both the traditional and developmental functions to achieve macroeconomic goals.the operating target. which lead to a number of fundamental changes. The state bank also regulates the volume and the direction of flow of credit to different uses and sectors. Pakistan embarked upon a program of financial sector reforms. lender of the last resort. State Bank of Pakistan has changed the format and designs of many bank notes which are currently in circulation in Pakistan. The amendments also increased the autonomy and accountability of the chief executives. . The State Bank having a role in their appointment and removal. and other functions like advising the government on policy matters and maintaining close relationships with international financial institutions. The non-traditional or promotional functions. banker to Government. the Boards of Directors of banks and DFIs. These steps were taken to overcome the problems of fraudulent activities. and provision of credit to priority sectors. regulation and supervision of the financial system. The secondary functions including the agency functions like management of public debt. the state bank makes use of both direct and indirect instruments of monetary management. and conduct of monetary policy.(DFIs). performed by the State Bank include development of financial framework. that would be achieved by observing the desired path of reserve money .

           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.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.  State Bank’s Shariah Board Approves Essentials and Model Agreements for Islamic Modes of Financing  Procedure for Submitting Claims with Sbp In Respect of Unclaimed Deposits Surrendered By Banks/Dfis. Here are some of the banking areas that the state bank looks into. Handbook of Corporate Governance Guidelines on Risk Management Guidelines on Commercial Paper Guidelines on Securitization SBP Scheme for Agricultural Financing Departments         Agriculture credit Audit Banking Inspection Banking Policy & Regulations Banking Supervision Corporate Services Economic Analysis Financial Monitoring Unit .

• Currency issuance and its overall management.                 Monetary Policy Research Statistics and Data Warehouse Exchange Policy Human Resource Information Systems & Technology Islamic Banking Legal Services Library Payment System Real Time Gross Settlement System (RTGS System) Small and Medium Enterprises Training and Development Department (TDD) Treasury Operations Strategic & Corporate Planning Microfinance Finance Department A BRIEF OF THE WORKING OF THE FINANCE DEPARTMENT SBP Functions of the Department:• Maintenance of books of accounts and preparation of financial statements of the Bank in accordance with the IAS. and District Governments Accounts. AGPR. • Maintenance of accounts relating to International Organizations and Donor Agencies like IMF. and other Govt. which includes designing. CBR. • Management of Federal. Policy & operations related coordination with MOF. as adopted by the Bank. Functions Performed By Divisions The Finance Department is responsible to perform and manage the functions detailed on pre-page. It controls the working of the Offices under the provisions of Issue and Banking Department Manuals. printing of currency notes and its circulation. agencies. • Coordination and facilitation for Business planning and budgeting function in the Bank and periodic reporting to the management and to the Board. • Maintenance of foreign currency accounts/ investments and execution of International payments and receipts. Asian Clearing Union (ACU) etc. Issue Department deals with management of currency operations. Provincial. ADB.. Banking Department relates to the operation of . IBRD.

the Department has been divided into seven divisions as detailed below: Financial Accounts Division (FAD) Financial Accounts Division performs the following functions: • • Preparation of Annual Financial Statements Accounting Policies for the bank. Management of General Provident Fund and Provident Fund balances of all employees of the Bank. maintenance of Federal and Provincial Government Accounts. • Creation or retirement of MTBs according to the “Daily Balance Position” of Federal Government. • Payments to executing agencies/ parties under various Loans/Grants of International Donor agencies viz.) and SBP. • Short/Medium term investment and Swap deposits and maintenance of Foreign Currency Accounts and revaluation of Foreign Currency Assets & Liabilities. booking of financial transactions in the books of accounts of Central Directorate and issue of weekly Statement of Affairs as required under the provisions of SBP Act. TCP etc. acquisition of SDR. • Monitoring of contraction and expansion of Currency operations • Consolidation of Departmental Budgets • Maintenance of Federal & Provincial Government Account on the basis of receipt and payments effected at our Field Offices and National Bank of Pakistan. • Maintenance of GL to provide information for informed decision-making. 1956. repurchase. • Transactions of the Foreign Funded Projects including TABS etc. Forex. Sale/ purchase of foreign currencies. Preparation of Weekly Statement of Affairs for issuance in the Government Gazette as Provided in the State Bank of Pakistan Act. • FCY payments of Govt. preparation of Profit and Loss Account and Balance Sheet on yearly basis. and revaluation of IMF Loans/ facilities. • Purchase. formulation of budget estimates of revenue and capital expenditure. FE-2 deposits etc. 1956.offices of the Bank. . Privatization Commission. SCR Requirements. MCR. Securities & Investment Division (FSID) • Maintenance and recording of Cash Reserve Requirement. foreign debt payments. • Transactions of Sale/ Purchase of Currencies & Settlement of ACU Account under ACU Arrangement. rollover. • Special US Dollar Government Bonds. Payment of Profit and principal payment on redemption. Operational control of working of offices by framing policies and procedures under the provisions of Banking/Issue Department Manuals. & remittances of the interest. of Pakistan (Defense. To achieve the above objectives. • Central Bank Deposits. • Quarterly profit updates to the Central Board of Directors. IBRD/ IDA/ ADB etc. • Preparation of daily balance position and communication thereof to the Federal Finance Division and Provincial Finance Departments. maintenance of foreign reserves of the country.

• To record all the expenses regarding repair/ maintenance and rent taxes for SBP buildings and equipments. Daily Reserves and Weekly review reporting. Monthly Abstract. and usage. implementation. SBP. which include designing.• • SBP’s investment in share capital of the banks/DFIs. Systems and Procedure Division (SPD) Systems & Procedures Division (SPD) acts as a liaison between functional users & ISTD to ensure effective systems development. • Participate in automated solutions development / configuration for SBP in financial areas Payment Controller Division (PCD) This Division is responsible for: • Making of payments to external suppliers and employees of the Bank after independent verification of transaction documents on the basis of bills/ invoices/claims approved by the processing units. keeping track of physical location of assets. Asset Management Division (AMD) Assets Management division is responsible for: • Assets capitalization. • Maintaining the financial information of the assets. • Checking and verifying the selected financial transactions/cases referred by the Director Finance to ensure accuracy and compliance to respective rules and regulations. Currency Management Division (CMD) Currency Management Division is responsible for: • Policy making and management of Currency related matters. . • To ensure the smooth and unhampered running of the Fixed Assets Management function. • Recommend continuous business process refinement in coordination with business units of Finance Department SBP and SBP BSC. in various automation projects under development / implementation (RTGS & Data Ware House). cost evaluation and retirements/ disposal. printing and issuance of Bank notes. assets transfers and overall responsibility to manage and maintain assets physical inventory. Major responsibilities are: • Representation of Finance Department.

Monthly and Quarterly Basis. Support Services Division Support Services Division performs the function as follow: • To deal with various administrative matters arising in the Finance Department • To provide a healthy and sound environment to officers of Finance Department . • Preparation of Balance Sheet of Issue Department at every financial yearend.• Issuance of Statements of Affairs of Issue Department on Weekly.

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