Primary functions•Issuance of notes oSbp has monoply according to act 1956 oTwo departments: Issue departmant banking dep
Cont;o Min. amount of reserve for issue of notes is 1.2 bil (30%)o Issue offices: located in Karachi, Peshawar, Lahore& a number of currncy chest all over the country
Primary functions• Conduct of monitory and credit policy – Tools of formulating monitory and credit policy: o 3day repo o T-bills o Open market operations o Cash reserve ratio o Statutory reserve ratio
Primary functions• Regulation & Supervision of financial system: • Pakistani law has given power to SBP to monitor financial system • SBP has issued prudential Regulation to insure safety and soundness of banks/DFI • SBP can monitor banking activities through: o off-site inspection o On-site inspection
Primary functions• Bankers bank• Bankers of Last resort – Provide loans and discount facility to bank – Prevent banks from liquidity – Mostly provide short term loans to meet temporary requirements of funds.
Primary functions• Bankers to Government: SBP provides following services to the government: – Accept cash deposits, checks and drafts by the government – Federal & provisional governments keeps their deposits with SBP free of interest – Federal & provisional governments obtain advances from SBP – SBP does not charge any commission – SBP purchase gold, silver, securities etc on behalf of government.
Secondary functions• Public debt management – SBP is responsible for public debt (act 1956) – Responsible for payment of interest to public debt – Sources – Need – objective – Securities department(1990)
Secondary functions• Management of foreign exchange – SBP is responsible for foreign exchange (act 1947) – SBP prevent country currency from wide fluctuations
Secondary functions• Advisor to Government – Advise on financial and economic matters particularly on monitory policy – Advise on loan operations – Participate in economic policy making – Monitory and fiscal policy coordination board (MFPCB) – MFPCB coordinate fiscal, monitory, trade policy & exchange rate policy
Secondary functions• Relationship with IFI’s – SBP deals with IMF on behalf of Government of Pakistan – Deals with other international financial organizations like world bank, bank of international settlement