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Role of state bank of pakistan
- 1. GROUP MEMBERS • Ala-Ud-Din Kibzai
- 2. ROLE OF STATE BANK OF PAKISTAN
- 3. OVERVIEW • Central bank of Pakistan is the “State Bank of Pakistan”. State bank of Pakistan was established on 1st July 1948. Quaid-e-Azam Muhammad Ali Jinnah performed its opening ceremony. • The headquarters are located in Karachi, Pakistan. • Established: 1948. • Governor: Tariq Bajwa. • Its second headquarters in the capital, Islamabad.
- 4. ORGANIZATIONAL STRUCTURE Governor is the head of the State Bank of Pakistan (SBP) and has two Deputy Governors, one each for Banking and Corporate Services. There is one Chief Economist in charge of Banking Regulations. Central Board of Directors • Consists of 9 directors. • Measuring the Money Supply.
- 5. CORE FUNCTIONS OF SBP
- 7. BANKER TO THE GOVERNMENT • As banker to the government, SBP: • a. Receives deposits (taxes, fees, fines, etc.) on behalf of the federal government. • b. Disburses payments (tax refunds, interest, etc.) on behalf of the federal government. • c. Manages the national debt (buys, sells, and cashes) government securities and pay interest/profit on them. • d. Lends money to the federal government as needed.
- 8. BANKER TO BANKS • 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.
- 9. ISSUER OF PAPER CURRENCY • State Bank has the sole authority to issue paper notes. It has the prime responsibility to control its supply in order to ensure a stable price of money, i.e., its value or purchasing power. Its notes, however, are not convertible into gold or silver.
- 10. SUPERVISOR OF BANKS AND OTHER FINANCIAL INSTITUTIONS: • One of the fundamental responsibilities of the State Bank is regulation and supervision of the financial system to ensure its soundness and stability as well as to protect the interests of depositors. • The banking activities are now being monitored through a system of ‘off-site’ surveillance and ‘on-site’ inspection and supervision. • A number of non-bank financial institutions were allowed to increase . The State Bank has also been charged with the responsibilities of regulating and supervising of such institutions.
- 11. TO FORMULATE AND IMPLEMENT THE MONETARY POLICY • The Bank is also in charge of conducting monetary policy which means changing the supply of money in the economy. The tools of the monetary policy are: • Changing the monetary base • Changing the reserve requirements • Changing the discount rate
- 13. MANAGEMENT OF DEBT • Due to shortage of resources government has to depend upon other rich nations. • Fiscal policy is a tool a government can use to accomplish the goals of progress capably by keeping a balance between revenue and expenditures.
- 14. MANAGEMENT OF THE 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. As the custodian of country’s external reserves, it is responsible for management of the foreign exchange reserves. • Imports exports
- 15. MAINTAINING CLOSE RELATIONSHIP WITH INTERNATIONAL FINANCIAL INSTITUTIONS. • International Relations • State bank of Pakistan maintains relations with different international financial institutions such as IMF, WBG, etc. It negotiates different contracts with these institutions on the behalf of government.
- 16. ADVISING THE GOVERNMENT ON POLICY MATTERS • It guides the government in financial and economic matters • · State bank assists the government in various credit scheme. • It informs the government about the monetary and fiscal situations of economy • · State bank helps the government in making investments
- 17. CONCLUSION
- 18. NON TRADITIONAL FUNCTIONS • State of Pakistan in Money Supply and Reserves • Development of Agriculture • Provision of Industrial Finance • Promotion of Islamic banking • And many more
- 19. STATE OF PAKISTAN IN MONEY SUPPLY AND RESERVES • The basic work of the State Bank of Pakistan, as the central bank, is to control and monitor the money supply in the country. • State bank maintain the money supply by controlling the interest rates in the country.
- 20. DEVELOPMENT OF AGRICULTURE • identifies Agriculture as a priority sector. • Our staff includes over 125 professionally qualified and well trained Agriculture Credit Officers. • scientific ways. • Lend land at low interest rates and easy payments. • Lend them instruments, pesticides to make them use scientific ways to enhance farming.
- 21. PROMOTION OF ISLAMIC BANKING Policies For Promotion Of Islamic Banking: In order to promote Islamic Banking in Pakistan, State Bank is following a three pronged strategy as under: I) Establishment of full-fledged Islamic bank(s) in the private sector; II) Setting up of subsidiaries for Islamic Banking by existing commercial banks; III) Allowing Stand-alone branches for Islamic banking in the existing commercial banks.
- 22. ROLE IN DEVELOPMENT OF NATION The Bank participate in the development process in the form of • Rehabilitation of banking system in Pakistan, • Development of new financial institutions , • Debt instruments in order to promote financial intermediation, • Establishment of Development Financial Institutions (DFIs), • Directing the use of credit according to selected development priorities, providing subsidized credit, and development of the capital market.
Editor's Notes
- Consists of 9 directors. One of them acts as the Corporate Secretary. The Governor of the State Bank presides as its Chairman. Measuring the Money Supply by State Bank of Pakistan Corporate Secretary: being responsible for the efficient administration of a company, implementing decisions made by the Board of Directors.
- Disburses : to pay out money from a fund for a specific purpose.
- Lender of Last Resort The state bake of Pakistan also acts as the lender of the last resort for the commercial banks. When commercial banks are in crisis and have shortage of cash, then state bank comes to their help. State bank may help the commercial banks by rediscounting their bills of exchange and by advancing loans against securities.
- surveillance: close observation, especially of a suspected spy or criminal. Off-site surveillance is conducted through regular checking of various returns regularly received from the different banks. On other hand, on-site inspection is undertaken by the State Bank in the premises of the concerned banks when required. To broaden financial markets as also to diversify the sources of credit, a number of non-bank financial institutions were allowed to increase substantially. The State Bank has also been charged with the responsibilities of regulating and supervising of such institutions. Substantially: to a great or significant extent. Broaden: become larger in distance from side to side. A non-bank financial institution (NBFI) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency
- Changing the monetary base: This directly changes the total amount of money circulating in the economy. The State Bank can use open market operations to change the monetary base. The Bank would buy/sell bonds in exchange for hard currency. When the central bank sells government bonds it receives hard currency in payment, thus reducing the money supply. It buys government bonds and pays hard cash to the sellers, thus, increasing the money supply. b. Changing the reserve requirements: Monetary policy can be implemented by changing the proportion of total assets that banks must hold in reserve with SBP. Banks only maintain a small portion of their assets as cash available for immediate withdrawal; the rest is invested in illiquid assets like mortgages and loans. By changing the proportion of total assets to be held as liquid cash, the SBP changes the availability of loanable funds. This acts as a change in the money supply. c. Changing the discount rate: Banks borrow money from the State Bank by cashing or discounting credit instruments, such as bills of exchange. By raising the discount rate SBP discourages banks to borrow money. If and when the goal is to increase the money supply, the Bank lowers its discount rate to encourage borrowing by the banks and, thus, helps increasing the money supply. Also by calling in existing loans or extending new loans, the monetary authority can directly change the size of the money supply.
- Debts Management Our scarce resources and government polices are not able to run the mega projects which needed heavy amount of resources. Due to shortage of resources government has to depend upon other rich nations. All these arrangement are the responsibility of the state bank on the behalf of government. fiscal policy is a tool a government can use to accomplish the goals of progress capably by keeping a balance between revenue and expenditures. Pakistan faces a fiscal imbalance because of two primary reasons: 1. The government’s diminished capacity to generate revenues in public sector and 2. Inability of state to reduce expenditures.
- And many more Promotion of Banking Habits, Promotion of Export through Refinance, Providing Indirect finance to Cooperative Sector, Exercising Control over Monetary and Banking system of the Country
- The State Bank of Pakistan is the premier banking organization of the country. It is the central bank of Pakistan; it has the power and all rights of controlling the operations of all the commercial banks of Pakistan. The bank was formed after the independence in 1947 and has given the all powers. The basic work of the State Bank of Pakistan, as the central bank, is to control and monitor the money supply in the country. This is done by appropriate issuance of notes, supervision and regulation of the entire financial system, foreign exchange management, etc. State bank maintain the money supply by controlling the interest rates in the country. With more interest rates, people would invest more in banks for the purpose of getting high returns. So in turn government would get more money also.
- Our Strategic Business Plan identifies Agriculture as a priority sector. Agriculture is the base on which the edifice of national economy is built and, needless to emphasize, also constitutes the fulcrum for poverty alleviation, employment generation and over all prosperity of the farmer. Our countrywide network of branches, that too predominantly at Tehsil level/remote rural locales and environs, affords us advantageous flexibility, outreach and demographic coverage to access and serve the Agrarians at their convenience on their doorsteps. Our staff includes over 125 professionally qualified and well trained Agriculture Credit Officers, fully conversant with latest farming procedures and practices and well versed in customs, norms, social ethos and aspirations of our tillers. Through our team, we are actively involved in disseminating information, imparting knowledge and rendering practical assistance at the level of every individual customer. We posess the scientific wherewithal to encourage farmers to invest in state of the art equipment, tools and implements etc. in the Dairy sector, especially in the wake of ever rising demand for Dairy Products. We enable our customers to achieve even greater productivity by enabling enhanced milking capacity, quality assurance, proper preservation and secure storage, as well as transportation to processing facilities. We have also recently launched Livestock Development initiatives, while our scheme for Fish Farming too has gained great popularity and success.