NAME: MUHAMMAD SHAF KHAN
REGESTRATION NUMBER: L1S19BBAM0217
SECTION: A
STRUCTURE AND FUNCTIONS OF SBP:
The State Bank of Pakistan (SBP) is the central bank of Pakistan. Before independence the
reserve bank of India is now the State Bank of Pakistan. The headquarters are located in the
financial capital of Pakistan, Karachi whereas the bank has a fully owned subsidiary with the
name SBP which is the operational arm of the central bank and has branch offices in 15 cities
across Pakistan, including the capital city Islamabad and the four provincial capitals.
MISSIONS OF SBP:
To promote monetary and financial stability to achieve sustained and equitable economic
growth.
BANKING SYSTEM:
Usually the starting point for a central bank is a banking system that is already in place. The
State Bank of Pakistan looks into many ranges of banking to deal with changes in the economic
climate and different purchasing and buying powers.
THE ROLE OF SBP IN ECONOMIC DEVELOPMENT OF PAKISTAN:
• Clearing house
• Advisor to government
• Controller of credit
• Economic growth
• Growth of credit institutions
ORGANIZATIONAL STRUCTURE:
Organizational Structure in State Bank of Pakistan, the head is called “Chairman” or “President”
of the Bank. And after President there is Five Broad of Directors. SBP has Seven Departments
which control the working of the Divisions, Wing, Section and Regional of the state bank of
Pakistan. Deposit Accounts Dept. Currency Management Dept. Departments of SBP Public
Accounts Dept. Following are various units at SBP:
DEPOSIT ACCOUNTS DEPT:
Main functions of the Deposit account unit are:
• Internal Monitoring Dept
• General Services Dept
• IT Department
• President’s Secretariat Board of Directors Secretary Board of Directors
CENTRAL BOARD OF DIRECTORS:
Consists of 9 directors. One of them acts as the Corporate Secretary
FUNCTIONS:
In order to achieve the goal set before it, the State Bank of Pakistan performed all the traditional
and non-traditional functions to achieve macroeconomics goals. The traditional functions,
generally performed by central banks all over the world, are classified into two groups.
PRIMARY FUNCTIONS:
including issue of notes, regulation of the financial system, lender of the last resort, and conduct
of monetary policy.
ISSUE OF NOTES
State Bank has the sole authority to issue paper notes. Except subsidiary coins which
are issued by the Government. It has the prime responsibility to control its supply in
order to ensure a stable price of money. The Bank adopted the Proportional Reserve
System for the issue of notes up to December 1965. The level of currency banking by
gold bullion, foreign securities is now fixed 1200 million through an ordinance in
December 1965. This system of note issue is known as minimum Reserve System. The
size of notes issue reflects the public demand for money. The number of notes in
circulation can be increased to meet the public demand and are adjusted according to
the general level of prices and economic activity in the country. The assets of the Issue
Department are always equal to liabilities. The overall affairs with respect to the issuing
of notes are conducted through separate departments of SBP, viz., Issue Department
which deals with the issue of notes. There are four issue departments one each in four
provincial capitals are Karachi, Lahore, Peshawar and Quetta. The remainder of the
assets of Issue Department should consist of rupee coins
REGULATION AND SUPERVISION OF THE FINANCIAL SYSTEM
The State Bank of Pakistan has full powers to supervise and control the banking system
in the country. The regulatory powers relate to the licensing of banks, and their branch,
expansion, liquidity of assets of banks, management and methods of working of the
banks and reconstruction and liquidation of banks, inspection of banks etc. Another
principal task of the Bank is to safeguard the soundness of the financial system. To
perform this crucial role effectively and efficiently, State Bank of Pakistan has been given
autonomous authority to regulate and supervise the activities of Banks, Development
Finance Institutions and Microfinance Banks. These laws have been subject to
amendments over time to meet changing circumstances. It is the responsibility of State
Bank to systematically monitor the performance of every banking company
BANKERS BANK
As banker to the scheduled banks, SBP:
Holds deposits made by them as a part of their required reserves 5% at this time.
Lends them funds as a “lender of the last resort” to meet their pressing needs by
discounting their bills of exchange and other
LENDER OF THE LAST RESORT
The State Bank of Pakistan is the lender of last resort for the commercial banks. It at any
time the banks are short of cash reserves, the State Bank of Pakistan comes to their
rescue. It provides cash to commercial banks by rediscounting bills of exchange and
treasury bills. The State Bank of Pakistan thus helps and maintain liquidity ad solvency
of the commercial banks.
BANKER TO GOVERNMENT
As banker to the government, SBP:
Receives deposits (taxes, fees, fines, etc.) on behalf of the federal government.
Disburses payments (tax refunds, interest, etc.) on behalf of the federal government.
Manages the national debt buys, sells, and cashes government securities and pay
interest/profit on them.
CONDUCT OF MONETARY POLICY
The State Bank of Pakistan frames and operators the monetary policy. Monetary policy
is conducted by the State Bank of Pakistan to regulate and control the volume of money
and credit supply in the country in order to achieve specific economic objectives such as
price stability, reducing unemployment. The main instruments of monetary policy are:
Opening market operations
Changing the reserve requirement
Changing the discount rate.
SECONDARY FUNCTIONS:
including management of public debt, management of foreign exchange, advising the
Government on policy matters, anchoring payments system, and maintaining close relationships
with international financial institutions.
MANAGEMENT OF PUBLIC DEBT
The Bank is responsible for the management of government debt under
section 21. Responsibilities of SBP are also defined in The Public Debt Act for public
debt management.
Subscribing Federal and Provincial governments’ securities at the time of their issue
Sale/purchase of such securities in the Money Market
MANAGEMENT OF FOREIGN EXCHANGE
The Bank is responsible to keep the exchange rate of the rupee at an
appropriate level and prevent it from wide fluctuations in order to maintain
competitiveness of our exports and maintain stability in the foreign
exchange market. Various exchange policies have been adopted at different
times for this purpose keeping in view the circumstances. SBP exercises full control on
payments that are transmitted in or out of the country and therefore issues licenses to
Exchange business and also other banks. Export price checks for different commodities
are also maintained to safeguard against their under invoicing.
ADVISING THE GOVERNMENT ON POLICY MATTERS
The State Bank of Pakistan, also acts as an advisor
to the Government on financial and economic matters particularly with
reference to their monetary aspects. The Bank counsels the Government on
loan operations and advises it with regard to the timings, terms and
conditions and rate of return on these loans. The advice is also tendered on
matters like agricultural credit, cooperative credit, industrial finance,
exchange regulations, banking and credit control, mobilization of savings,
financial aspects of planning and development and similar other economic
issues. State Bank of Pakistan also tenders advice to the Government on
debt management issues.
MAINTAINING CLOSE RELATIONSHIPS WITH INTERNATIONAL FINANCIAL
INSTITUTES
The State Bank of Pakistan also deals with other international financial organizations
including Bank for International Settlement, the World Bank, Central Banks of foreign
countries, etc. Almost all the agreements of Provincial and Federal
Government with International Financial Institutions are executed
through the State Bank of Pakistan.
NON-TRADITIONAL:
Development of financial framework
The most significant contribution made by the State Bank of Pakistan
towards facilitating and fostering economic development in Pakistan was the
rehabilitation of the banking system in Pakistan and over all development of
banking industry in the country.
PROVISION OF TRAINING FACILITIES TO BANKERS
Keeping in view an acute shortage of trained bankers at the time of
independence, the State Bank introduced "Bank Officers Training Scheme".
Institute of Bankers Pakistan was established in 1951 for conducting
examinations in prescribed banking courses for qualified banking staff in the
country. All the branches of SBP have local offices of the Institute which
organize seminars and short courses on current and important issues in
banking industry of Pakistan. The institute also conducts annual essay
competition on various economic issues and awards prizes to the four best
essays.
PROVISION OF CREDIT TO PRIORITY SECTORS
Different credit funds from time to time are allocated to motivate sectors
like agriculture, industry etc. in areas where there is potential of gaining
produce for the purpose of commercial export etc.
ISLAMIZATION OF THE BANKING SYSTEM
The State Bank had been making efforts since its inception to evolve and
introduce a financial system based on the norms of the Shariah. While
inaugurating the State Bank of Pakistan, the Father of the Nation, Quaid-e-Azam
Muhammad Ali Jinnah, and later on the first Governor of the Bank,
late Zahid Hussain, gave a direction to make efforts to build the economic
and financial system of the country on the lines dictated by Islam. However,
the work could not be started forthwith as the experts in Islamic
jurisprudence and the modern economics both were not available.
