State Bank of Pakistan SBP BSC Peshawar Internship report 2020

Internship Report
On
State Bank of Pakistan, Banking Services Corporation (BSC)
Peshawar
Session 2016-20
Supervised by:
Mr. Amir Hussain
Lecturer
Submitted by:
Aymen Siddiqui
BBA (Hons) - Finance
Roll No. 02
INSTITUTE OF MANAGEMENT STUDIES (IMS)
UNIVERSITY OF PESHAWAR
Session 2016-2020

INTERNSHIP REPORT ON STATE BANK SBP BSC (Peshawar)
BY
AYMEN SIDDIQUI
CLASS No. 02
BBA (HONS) FINANCE
SESSION 2016-2020
An internship report submitted to the Institute of Management Studies, University of
Peshawar, Peshawar, Khyber Pakhtunkhwa, Pakistan, in partial fulfillment of the requirements
for the degree of
BACHELOR OF BUSINESS ADMINISTRATION HONORS (FINANCE)
Approved By:
______________________ _________________________
Mr. Amir Hussain (Supervisor) Dr. Hamid Ullah (External Examiner)
_______________________ _______________________
Dr. Sajjad Khan (Director IMS) Dr. Mehnaz Gul (Coordinator)
INSTITUTE OF MANAGEMENT STUDIES,
UNIVERSITY OF PESHAWAR, PAKISTAN
JULY 2020

P a g e | | 4 | P a g e R e p o r t o n S B P B S C P E W
Dedication
I dedicate all my efforts and struggles of the educational life to my dear parents; without them I am
meaningless. Also, I devote the work of this internship report to respectable and honorable teachers
who taught and supported me in developing my personality as a competent professional.

Acknowledgment
First, I thank Allah, who is the holder of my breaths, without His order nothing is possible. I am
highly thankful to my respectable teachers and friends and family members who were my support
system throughout my educational career,
I would like to deeply thank the State bank of Pakistan for giving me the great opportunity to be part
of its Summer Internship Program, SIP 2019. It was an enlightening experience that gave me lots of
precious and valuable knowledge regarding all the banking functions. I wish to express my sincere
gratitude to Mr. Mujeeb-Ur-Rehman, our internship program supervisor whose willingness to
motivate me contributed tremendously to our internship program and conducting the report. Besides,
I would like to thank all the supervisors and mentors of all units of the SBP BSC Peshawar, their
efforts, knowledge, and kind teachings allowed me to take part and learn about the operations of
those units working actively in the bank.

Acronyms
ACM ASSISTANT CHIEF MANAGER
A/C ACCOUNT
AG ACCOUNTANT GENERAL
AGPR ACCOUNTANT GENERAL PAKISTAN REVENUE
B.D BANK DRAFT
BSC BANKING SERVICE CORPORATION
CDNS CENTRAL DIRECTORATE OF NATIONAL SAVINGS
CMU CURRENCY MANAGEMENT UNIT
CTS CHEQUE TRUNCATION SYSTEM
DAU DEPOSIT ACCOUNT UNIT
DCM DEPUTY CHIEF MANAGER
DDO DRAWING AND DISBURSING OFFICER
D.P DEMAND PROMISSORY
FEOD FOREIGN EXCHANGE OPERATION DEPARTMENT
FBR FEDERAL BOARD OF REVENUE
FTO FEDERAL TREASURY OFFICER
G.D GOVERNMENT DRAFT
GPF GENERAL PREVALENT FUND
GSU GENERAL SERVICE UNIT
GTA GROUP TERMS ASSURANCE
I/T ISSUE AND TREASURY
IAU INTERNAL AUDIT UNIT
MT MAIL TRANSFER
NBP NATIONAL BANK OF PAKISTAN
NIBAF NATIONAL INSTITUTE OF BANKING AND FINANCE
NIFT NATIONAL INSTITUTE OF FACILITATION TECHNOLOGIES
NSS NATIONAL SAVINGS SCHEME
OG OFFICER GRADE
PAU PUBLIC ACCOUNT UNIT

PBU PRIZE BOND UNIT
PBC PAKISTAN BUSINESS COUNCIL
PDO PUBLIC DEBT OFFICE
PSPC PAKISTAN SECURITY PRINTING CORPORATION
RTGS REAL TIME GROSS SETTLEMENT
SBP STATE BANK OF PAKISTAN
SMU STAFF MATTERS UNIT
T.O TREASURY OFFICER
T.T TELEGRAPHIC TRANSFER

Executive Summary
As we all know that State Bank Pakistan is the central bank of Pakistan. It controls and regulates all
the commercial banks operating in Pakistan. It is a monetary body, that maintains and manages the
money supply in the country. State Bank of Pakistan is the Banker's Bank and also the Bank of
Government, this is the reason why I applied for an internship at State Bank of Pakistan. There is a
large number of units in this BSC and each unit performs separate functions for daily financial
matters that is why internee can learn many banking/operational aspects of a bank under one roof.
We had a rotational internship of 08 weeks in several Units of SBP-BSC Peshawar. Namely Currency
Management Unit, Currency Accounts Unit, Foreign Exchange Operation Department,
Development Finance Unit, Refinance Scheme Unit, Deposit Account Unit, Public Account Unit,
Prize Bond Unit, General Services Unit, and Staff Matters Unit. This report discusses the Strengths,
Weaknesses, Opportunities, and Threats related to the SBP-BSC. It recommends some valuable
suggestions to policymakers of the State Bank of Pakistan and in the end, the overall discussion is
concluded.

Table of Contents
Dedication ……...................................................................................................................................4
Acknowledgment ..............................................................................................................................5
Acronyms …… .................................................................................................................................6
Executive Summary..........................................................................................................................8
Part I Introduction ................................................................................................................11
Chapter 1 Introduction of the Study..........................................................................................11
1.1 Background of the Study: .................................................................................................................11
1.2 Objectives of the Study:....................................................................................................................11
1.3 Scope of the study:............................................................................................................................12
1.4 Limitations of the Study:...................................................................................................................12
1.5 Methodology of the Study: ...............................................................................................................12
1.6 Scheme of the study:.........................................................................................................................13
Part II Review...........................................................................................................................14
Chapter 2 Overview of the State Bank of Pakistan ..........................................................................14
2.1 History...............................................................................................................................................14
2.2 State Bank of Pakistan (SBP)............................................................................................................15
2.3 Governance Structure of SBP ...........................................................................................................15
2.4 Departmental Structure of SBP.........................................................................................................16
2.5 Subsidiaries of the SBP.....................................................................................................................18
2.6 Functions of SBP ..............................................................................................................................19
2.7 Products and Services of SBP ………………………………………...…………………..……….21
Chapter 3 Overview of SBP Banking Services Corporation......................................................25
3.1 SBP-Banking Services Corporation (BSC):......................................................................................25
3.2 Vision………………………………………………………………………………………………23
3.3 Mission …………………………………………………………………………………………....23
3.4 Objectives ……………………………………………………………………………………..…..23
3.5 Key Functional & Operational Areas: ..............................................................................................25
3.6 Regional Offices of SBP-BSC ..........................................................................................................26
3.7 Governance Structure of SBP-BSC ..................................................................................................26
3.8 Management Structure of SBP-BSC.................................................................................................28
3.9 Functions of SBP-BSCs....................................................................................................................28
3.10 Departments of SBP-BSC...............................................................................................................29
Chapter 4 SBP BSC Peshawar..................................................................................................33
4.1 History...............................................................................................................................................33
4.2 Divisions of SBP BSC Peshawar......................................................................................................33
4.3 Organogram of SBP BSC Peshawar .................................................................................................35

4.4 Rotational Internship in SBP BSC Peshawar:...................................................................................36
PART III ANALYSIS …………………………………………………………………………………………………………49
Chapter 5 Financial Analysis...................................................................................................49
5.1 Financial Analysis ……………………………………………………………………………….49
5.2 Ratio Analysis ……………………………………………………………………………………………………………………… 49
5.3 Trend Analysis …………………………………………………………………………………………………………………………58
5.4 Common size/ Vertical Analysis ……………………………………………………………………………………………...60
Chapter: 6 Swot Analysis............................................................................................................65
6.1 Strengths: ………………………………………………………………………………………………………………………………..65
6.2 Weakness: ……………………………………………………………………………………………………………………………….67
6.3 Opportunities: ………………………………………………………………………………………………………………………….67
6.4 Threats: ……………………………………………………………………………………………………………………………………68
PART IV CONCLUSION…………………………………………………………………….67
Chapter 7 Findings, Recommendation, and Conclusion ...........................................................69
7.1 Personal Learning: …………………………………………………………………………………………………………………..69
7.2 Findings: ………………………………………………………………………………………………………………………………….76
7.3 Recommendation: …………………………………………………………………………………………………………………….76
7.4 Conclusion: ………………………………………………………………………………………………………………………………78
BIBLIOGRAPHY:................................................................................................................................79
Annexure A Unconsolidated Balance Sheet Of SBP …………………………………………………..80
Annexure B Unconsolidated Profit and Loss Account Of SBP ……………………………………….81
Annexure C Unconsolidated Income Statement of SBP ……………………………………………….82
Annexure D Unconsolidated Statement of Cash Flows Of SBP ……………………………………….83

Part I Introduction
Chapter 1: Introduction of the Study
1.1 Background of the Study:
It is necessary for the students of bachelor's that they should be acquainted with the practical
applications of their studies and gain experiences. In this connection, every student is required to
undergo a practical work known as “Internship” (meaning: Job before the job) of at least 06 weeks
in any organization. An internship is aimed to familiarize the students with the actual working
environment in any organization. Provides students with real-world experience in any public or
private organization. It provides knowledge regarding procedural and functional activities performed
in various areas of the organization. It enables the students to compare theoretical ideas learned in
the classroom within the work of corporate world experiences.
Provides a student with experience in an actual organization before entering the job market. Such an
experience not only increases students’ job prospects but also teaches what is expected in terms of
professional behavior. This program helps increase the communication skills among students as they
interact with different practical oriented professionals during the period of internship. Permits the
student to apply the technical skills learned in the classroom to the real world organizational
administrative problems.
1.2 Objectives of the Study:
• To obtain a good amount of confidence and to become aware of the mechanism of the institution
by working, dealing with officials, etc.
• To gain knowledge about the effectiveness of schemes, policies, and services in the competitive
business environment.
• To know how an institution plays its role significantly in the development of financial and other
sectors.
• To make recommendations or implementation plans for the improvement of the operations of the
institution in light of my professional studies.
• To examine the degree of services provided by them to the general public.
• To evaluate the decision-making process of management etc.

1.3 Scope of the study:
The scope of the study is only limited to this SBP-BSC Peshawar and its financial position. This
report covers some areas of banking activities of SBP-BSC Peshawar. The SBP-BSC that includes
the Administration Division, Issue and Treasury (Cash) Division, FEOD, DFD Division, Prize
Bond Securities Division, and Banking Division. The report limits itself to understanding the
activities of various departments rather than aiming for an extensive analysis of the entire banking
activities handled by SBP. It was beyond the scope of this report to study the entire process of each
department because of feasibility and time considerations.
1.4 Limitations of the Study:
SBP-BSC is the operational arm of SBP so it is quite difficult to cover its all financial aspect
especially when there is a time constraint. Nevertheless, the requirement to specialize in one aspect
of the organization (Financial analysis of SBP-BSC) made the study an improved and beneficial one.
However, an analysis of the organization as a whole, based on some reports, observations, and
annual/quarterly reports has made the job done more convenient. As SBP BSC had been providing
services for a long time, it is impossible to do the comparative analysis. SBP BSC has a large number
of departments and its subsequent units it is difficult to study the overall organization. Access to data
regarding different performance indication was limited. The sample size is a major limitation of the
report because only a few employees were willing to spare me some time and give answers to the
questions asked. Finally, I seek some recent data published on the website of the State Bank of
Pakistan which was needed to enrich the report.
Despite all the above-mentioned problems, I tried my best to overcome all these limitations and
shortcomings and provide unbiased information of the organization to make my project of academic
significance
1.5 Methodology of the Study:
To study an organization, one needs to have reliable and relevant data/information. The study uses
two types of data, gathered through different sources, which can be grouped into Primary and
Secondary data. I used these two types of data for my study.
1.5.1 Primary Data:
The data collected for the first time or the raw shape of data unprocessed data is called primary
data.
The sources for the primary data are:
 Interviews with managers and employees of different units
 Personal observations

1.5.2 Secondary Data:
The data has gone through mathematical and statistical techniques after its collection is called
Secondary data.
The sources for the collection of Secondary data are:
 Annual reports of SBP-BSC
 Material available at different units of SBP-BSC PEW
 Handbooks
 SBP Vision 2020
 Annual Performance Review 2018-19
 Financial Stability Review-2019
 Fiscal Policy Statement 2018-19
1.6 Scheme of the study:
The report consists of four parts. It is organized as follows.
Part I: Introduction
This part includes the background of the study, objectives, scope, limitations, methodology, and
scheme of the study.
Part II: Review
In the review part, there is an overview of SBP and SBP-BSC, Its history, vision, mission,
objectives, and organizational structure.
Products and services provided by SBP and various departments/units of SBP-BSC Peshawar are
discussed in this part.
Part III: Analysis
In this part, financial analysis as well as common size analysis are discussed.
This also includes SWOT Analysis of SBP-BSC Peshawar.
Part IV: Conclusion
In this part, first, the findings are discussed and then recommendations are given for the areas where
SBP-BSC needs to give attention and spend energies. At last, the conclusion is given.

Part II Review
Chapter 2 Overview of the State Bank of Pakistan
2.1 History
Before independence, the Reserve Bank of India was the central bank of the sub-continent. It was
not easy to set up a central bank from the day of independence, therefore, at the time of partition
reserves of the central bank were divided between both the countries i.e. India and Pakistan with a
ratio of 70:30. Further, the Reserve Bank of India continued its duties as a central bank for both the
countries.
However, working for own central bank had been started in Pakistan, and finally, on July 01, 1948,
Quaid-e-Azam Mohammad Ali Jinnah inaugurated the State Bank of Pakistan at Karachi since
then it is working as the Central Bank of the country.
Initially, the State Bank of Pakistan was entrusted with the task to “regulate the issue
of banknotes and keeping of reserves to secure monetary stability”.
However, the State Bank of Pakistan Act 1956 further strengthened the bank by giving it the
authority to regulate the credit and monetary policy of the country. The State Bank of Pakistan Act
1956, with subsequent amendments, forms the basis of its operations today.
In 1997, the State Bank of Pakistan was given full autonomy through an amendment ordinance in
the Act of 1956. After these amendments, SBP has full and exclusive authority to regulate the
banking sector, conduct an independent monetary policy, and set limits on government borrowings
from the State Bank of Pakistan. In 2005, an ordinance has given the money exchange companies a
legal status in the country, and now all money exchange companies are also working under the
umbrella of SBP. Hence, since 2005 the central bank of Pakistan is acting as a regulatory and
controlling authority for money exchange companies just like commercial banks of the country.
The power and the functions of the State Bank are governed by the State Bank of Pakistan Act 1956
and the banking companies’ ordinance 1962 with subsequent amendments. The affairs of the State
Bank are conducted on the pattern of the Bank of England through two nationally separate
departments, the Issue Department, and the Banking Department. The Banking Department transects
the general banking business whereas the Issue Department deals with the issue of notes. Their
accounts are published separately in the weekly statement of affairs.

2.2 State Bank of Pakistan (SBP)
State bank of Pakistan is the Central Bank of Pakistan. To achieve the goals, set before it, the State
Bank of Pakistan performs all the traditional and non-traditional functions. The traditional functions,
which are generally performed by Central Banks all over the world, are classified into two groups.
The Primary functions and the Secondary Functions.
The Primary functions include the issue of notes, regulation, and supervision of the financial system,
Banker’s bank, the lender of last resort, Banker to the Government, and conduct of Monetary Policy.
The Secondary functions of the Central Bank include agency functions like management of public
debt, foreign exchange, etc. and other functions like advising the government on policy matters and
maintaining close relationships with international financial institutions.
The non-traditional and promotional functions performed by State Bank include the development of
the financial framework, institutionalization of savings and investment, provision of training
facilities to bankers, and provision of credit to priority sectors.
The Central Bank operations can also be categorized into macroeconomic function and
microeconomic function. The macroeconomic function is to preserve the value of the currency, that
is, maintain price stability and the microeconomic function is to maintain stability in the banking
system.
2.2.1 Vision
To be an independent and credible central bank that achieves monetary and financial stability and
inclusive financial sector development for the long-term benefit of the people of Pakistan.
2.2.2 Mission
To promote monetary and financial stability and foster a sound and dynamic financial system, to
achieve sustained and equitable economic growth and prosperity in Pakistan.
2.3 Governance Structure of SBP
2.3.1 The Board of Directors
The State Bank of Pakistan is governed by an independent Board of Directors, which is responsible
for the general superintendence and direction of the affairs of the Bank. The Board is chaired by the
Governor SBP and comprises of 8 non-executive Directors and Secretary Finance to the Federal
Government. Non-executive Directors of the Board are appointed by the Federal Government for a
3-year term.

2.3.2 Monetary Policy Committee (MPC)
Monetary Policy Committee of the State Bank of Pakistan is an independent body responsible to
formulate the monetary policy of the SBP. More notably, MPC determines the policy interest rate of
the SBP and approves the Monetary Policy Statement. MPC consists of ten members: the Governor
(Chairman), three members of the Board, nominated by the SBP Board, three senior executives of
the SBP, nominated by the Governor, and three External Members (economists) appointed by the
Federal Government on the recommendation of the SBP Board. The External Members are appointed
for a term of three years.
2.3.3 Management of the SBP
Governor SBP is the Chief Executive Officer of the Bank and manages the affairs of the Bank on
behalf of the Board. The Governor is appointed by the President of Pakistan for a term of three years
which is renewable once. He is assisted by one or more Deputy Governors appointed by the Federal
Government for a period not exceeding five years. In addition to the Governor and Deputy
Governors, the management hierarchy includes Executive Directors, Chief Economic Advisor, and
Directors of various departments.
2.4 Departmental Structure of SBP
2.4.1 Banking Policy and Regulation Group
 Banking Policy & Regulations Department
 Exchange Policy Department
2.4.2 Banking Supervision Group
 Banking Inspection Department -I
 Banking Inspection Department - II
 Banking Conduct and Consumer Protection Department
 Off-site Supervision & Enforcement Department
 Financial Stability Department
2.4.3 Development Finance Group
 Islamic Banking Department
 Agricultural Credit & Microfinance Department
 Infrastructure, Housing & SME Finance Department
2.4.4 Financial Market and Reserve Management
 Domestic Market & Monetary Management Department
 International Markets & Investments Department
2.4.5 Financial Resource Management
 Finance Department
 Risk Management Department
 Treasury Operations Department

2.4.6 Governor Office
 External Relations Department
 Office of the Corporate Secretary
 Internal Audit & Compliance Department
2.4.7 Human Resources
 Human Resource Department
2.4.8 Chief Economic Advisor
 Monetary Policy Department
 Research Department
 Economic Policy Review Department
 Statistics and Data Warehouse Department
 Library
2.4.9 Operations
 Information Technology Strategy & Project Management Department
 Information Systems Department
 Information Technology Department
 Payment Systems Department
 Legal Services Department
 Museum & Art Gallery Department
 Strategic Planning Department

Organogram of State Bank of Pakistan
Virtual departments of SBP:
SBP is divided into two departments virtually.
 Issue Department
 Banking Department
2.5 Subsidiaries of the SBP
The SBP holds “Four” fully owned subsidiaries to augment its functions. These are:

2.5.1 SBP-Banking Services Corporation (SBP-BSC)
Established under the SBP-BSC Ordinance 2001, SBP-BSC supports SBP in performing functions
such as handling of currency and credit management, facilitating the inter-bank settlement system,
and sale/purchase of savings instruments of the Government on behalf of the Central Directorate of
National Savings. SBP-BSC also collects revenue and makes payments for and on behalf of the
Government. It also carries out operational work relating to development finance, management of
public debt, foreign exchange operations, and export refinance.
It consists of 16 field offices in Pakistan with the head office in Karachi (HoK).
2.5.2 National Institute of Banking and Finance (NIBAF)
National Institute of Banking and Finance (Guarantee) Limited was incorporated in Pakistan under
the Companies Act, 2017 as a company limited by guarantee having a share capital. It is engaged in
providing education and training in the field of banking, finance, and allied areas. NIBAF is the
training arm of SBP, providing executive development training to new inductees and various levels
of SBP employees. The subsidiary also conducts international courses on central and commercial
banking in collaboration with the Federal Government.
The head office of the Institute is situated at NIBAF Building, Street 4, Pitras Bukhari Road, H-8/1,
Islamabad, Pakistan.
2.5.3 Deposit Protection Corporation (DPC)
Deposit Protection Corporation (DPC) has been established as a wholly-owned subsidiary of SBP
under the DPC Act 2016. Upon commencement, this entity will be responsible to protect deposits of
member financial institutions operating in Pakistan. The objective of DPC is to compensate the
depositors to the extent of protected deposits in the event of failure of a member's Financial
Institution. To protect depositors of Islamic Banks and branches, a separate Shariah-compliant
mechanism of deposit protection shall be put in place.
2.5.4 Pakistan Security Printing Corporation (PSPC)
Pakistan Security Printing Corporation (Private) Limited was incorporated under the Companies Act,
2017, and is a wholly-owned subsidiary of State Bank of Pakistan. The PSPC is principally engaged
in the printing of currency notes and national prize bonds on behalf of the Bank.
The registered office and the factory of the PSPC are located at Jinnah Avenue, Malir Halt Karachi,
in the province of Sindh, Pakistan.
2.6 Functions of SBP
Like a Central Bank in any developing country, the State Bank of Pakistan performs both the
traditional and developmental functions to achieve macro-economic goals. The State Bank also has

been playing an active part in the process of Islamization of the banking system. The main functions
and responsibilities of the State Bank can be broadly categorized as under.
2.6.1 Sole Right of Notes Issue: One of the primary responsibilities of the SBP is the regulation of
currency as per the requirements of business and the general public. The State Bank of Pakistan has
the sole right to issue notes except subsidiary coins which are issued by the Govt, under Section 24
of the State Bank of Pakistan Act, 1956. The Bank adopted the Proportional Reserve System for
the issue of notes up to December 1965. The level of currency backing by gold bullion, foreign
securities, Govt. Securities, coins, and foreign currency is now fixed 1200 million through an
ordinance in December 1965. This system of note issue is known as the Minimum Reserve System.
The overall affairs concerning the issuing of notes are conducted through two notionally separate
departments of SBP, viz., the Issue Department which deals with the issue of notes, and the Banking
Department which undertakes general banking business. The size of the 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.
There are four Issue Departments one each in four provincial capitals viz., Karachi, Lahore,
Peshawar, and Quetta.
2.6.2 Ensuring the soundness of Financial System: 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 SBP 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'
amalgamation and reconstruction and liquidation of banks, an inspection of banks, etc.
The banking activities are now being monitored through a system of ‘off-site’ surveillance and ‘on-
site’ inspection and supervision. Off-site surveillance is conducted by the State Bank through regular
checking of various returns regularly received from the different banks. On the other hand, on-site
inspection is undertaken by the State Bank on the premises of the concerned banks when required.
2.6.3 Banker's Bank: State Bank of Pakistan performs the function of bankers to Banks. All
commercial banks open and maintain their accounts with SBP. They are also required to deposit 5%
of their time and demand liabilities with SBP as cash reserves and 20% as an investment in govt.
securities called Statutory Liquidity Ratio. Such banks deposit and withdraw the money from SBP
according to their requirements as individuals maintain their accounts.
State Bank provides the following important services to the scheduled banks:
 It holds cash reserves and deposits of commercial banks.
 The SBP is the lender of last resort for commercial banks. It rediscounts the bills of exchange of
commercial banks to cover temporary difficulties.

 The State Bank provides extensive remittances facilities to banks at a concessional rate under the
Remittance Facilities Scheme
 It enables the central bank to influence the creation of credit by commercial banks in the best
interest of the country.
 To streamline payments through the financial system, the Bank also manages the operations of
clearing houses.
2.6.4 Development & Implementation of Monetary Policy: The State Bank of Pakistan frames
and operates the monetary policy. Monetary policy is conducted by the SBP to regulate and control
the volume of money and credit supply in the country to achieve specific economic objectives such
as price stability, reduce unemployment, the stability of money supply in circulation, etc. The main
instruments of monetary policy are;
i. Open Market Operations: this technique is used for expanding or contracting the money supply
in the country. By buying the Govt. Securities in the open market, the SBP expands the money supply
and by selling securities it contracts the money supply in the country.
ii. Change in Reserve Requirement: The SBP also controls the money supply in the country by
changing the cash reserve requirements of the commercial banks. An increase in the cash reserve
ratio reduces the excess reserves of the bank and limits the powers of the banks to advance loans.
The decrease in the cash reserve ratio increases the cash reserves of the commercial banks which
increases the capacity of the banks to advance more loans. The SBP now requires the scheduled
banks to maintain at least 25% of demand and time liabilities with it.
iii. Change the Discount Rate: The bank rate is the rate of interest at which the SBP discounts the
first-class bills of exchange. The rise in the bank rate pushes up the cost of borrowing of commercial
banks and reduces the money supply in the country. A decrease in bank rate works in the opposite
direction.
2.6.5 Conduct of Monetary and Credit Policies: SBP is responsible to regulate the monetary and
credit system of the country in such a manner that ensures monetary stability in the economy. Section
9A of the SBP Act, 1956 entrusts the Central Board of the Bank to formulate and monitor monetary
and credit policy by taking into account the Federal Government's targets for growth and inflation,
following the recommendation of the Monetary and Fiscal Policies Co-ordination Board (MFPCB).
The SBP has a few instruments at its disposal to regulate the volume of credit and to ensure its flow
to the priority sector.
2.6.6 As Government’s Banker: As the Government’s banker SBP conducts the banking accounts
of Government departments, boards, and enterprises; it makes temporary advances to the
Government in form of the collection of taxes or the raising of loans from the public, and
extraordinary advances during a depression, war or other emergencies; and it carries out the
Government’s transactions involving purchases or sales of foreign currencies. The Federal and

Provincial governments can obtain advances from the Bank subject to mutual agreements without
any collateral security.
It collects all govt. receipts like federal, provincial, property, excise taxes from the general public on
behalf of the govt. It also pays the government-issued cheques to the employees of the govt. All
salaries are paid by the State bank of Pakistan on its behalf. SBP usually pays to the employees of;
 Pakistan Railway
 Military/Army
 Police
 Air force
 Navy
 Provincial/ Federal Govt.
2.6.7 As Government’s Financial Agent: As a financial agent to the Government, it collects taxes
and other payments on behalf of it. It also manages exchange stabilization funds. It accepts the
deposits of cash, cheques, and drafts by the Government and undertakes the collection of cheques
and drafts drawn on other banks. The Bank transfers government funds from one account to another
or from one center to another as advised by them. Federal and Provincial governments keep their
deposits with the Bank free of interest. In turn, the Bank does not charge any commission to the
governments for the banking services rendered to them.
On behalf of Federal, Provincial or Local governments the Bank also undertakes sale/purchase of
gold, silver, approved foreign exchange, securities or shares in any company, collection of return on
these shares/securities.
2.6.8 As Government’s Adviser: SBP also acts as an advisor to the Government on financial and
economic matters particularly regarding their monetary aspects matters such as deficit financing,
foreign exchange policy, etc. The Bank counsels the Government on loan operations and advises it
regarding 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.
2.6.9 Exchange Rate Management and Balance of Payments:
One of the major responsibilities of the SBP is the maintenance of the external value of the currency.
In this regard, the Bank is required, to regulate foreign exchange reserves of the country in line with
the stipulations of the Foreign Exchange Act 1947.
As an agent to the Government, the Bank has been authorized to purchase and sell gold, silver, or
approved foreign exchange and transactions of Special Drawing Rights with IMF. The Bank is
responsible to keep the exchange rate of the rupee at an appropriate level and prevent it from wide
fluctuations to maintain the competitiveness of our exports and maintain stability in the foreign
exchange market.

2.6.10 Micro Finance: To expand the banking services at the grass-root level and to enable the
financial sector to play its role in poverty alleviation, SBP is promoting micro banking in the country.
It has facilitated two microfinance banks namely Khushali Bank in the public sector and the First
Micro Finance Bank (FMFB) Limited is set up in the private sector.
2.6.11 Promotion of Islamic Banking: To meet the latent demand for Shariah-compliant solutions
of various financial needs of the masses, it is playing a leading role in the promotion of Islamic
Banking in Pakistan. Conferences, workshops, seminars, and presentations are being conducted to
create public awareness and develop better coordination among various stakeholders of Islamic
banking.
2.6.12 Management of Public Debt: State Bank of Pakistan also performs the services of managing
public debt on behalf of the Govt./National Savings. Two PDOs in Pakistan are authorized to receive
debt from the public. These debts may be collected against prize bonds, National Saving Certificates
like Special Saving Certificates, or Defence Saving Certificates. SBP manages the proceeds against
such instruments.
2.6.13 SBP as Clearing House: The State Bank of Pakistan acts as a clearinghouse for the
commercial banks. A clearinghouse is a place where representatives of commercial banks meet each
day to exchange cheques drawn on each other and then settle the differences owned to each other.
State bank thus helps the commercial banks in millions of payments by a minimum of transactions.
2.7 Products and Services of SBP
State Bank of Pakistan is at the forefront of international banking in Pakistan which is proven by the
fact that SBP deals in major financial capitals across the world. Additionally, it has recently set up
the Financial Institution Wing. The role of the Financial Institution Wing is:
 To effectively manage SBP exposure to foreign and domestic correspondence
 Manage the monetary aspect of SBP's relationship with the correspondents to support trade,
treasury, and other key business areas, thereby contributing to the bank's profitability
 Generation of incremental trade-finance business and revenues.
The following products & Services are:
2.7.1 Trade Finance:
o Opening, advising, confirmation, and negotiation of letters of credit.
o Discounting of LCs including providing bankers acceptances.
o Trade loan syndications.
o Risk participations.
o Pre/post export financing.
o Issuance of financial guarantees/SBLCs.

o Documentary collections.
2.7.2 Cash Management:
o Specialized Deposit Slips – conventional collection model.
o Internet Banking – electronic collection (non-individual/business customers).
o Cash in Transit – CIT
o Direct Debit Collection – SIDA (Standing Instructions for Debit Authority).
o Utility Bills Payments – UBP
o HBL At Work (HAW) – payroll solution.
o Vostro account services.
o Commercial Payments – SSI
2.7.3 Remittances: With a substantial market share in the distribution of incoming home
remittances into Pakistan, SBP has the built-up capacity to serve overseas FIs wishing to
remit funds for beneficiaries in Pakistan as well as in other specific locations.
2.7.4 Treasury:
o Money market placements.
o FX/Swaps.
o Bonds /TFCs.
o Private placements & other debt instruments.
2.7.5 Bilateral Loans: Customized bilateral products are available to fulfill the financing
requirements of NBFIs, which includes term loans and SBLC facilities

Chapter 3 Overview of SBP Banking Services Corporation
3.1 SBP-Banking Services Corporation (BSC):
State Bank of Pakistan-Banking Services Corporation (SBP-BSC) was established in January 2002 to perform
operational functions of SBP, under the SBP Banking Services Corporation Ordinance 2001. While the
SBP performs the important function of policymaking, SBP-BSCs handle most of the operational areas. The
SBP makes monetary policies, SBP-BSC’s implement those policies.
3.2 Vision:
To develop SBP-BSC into a dynamic and efficient organization equipped with requisite technology
and human resource capable of extending sustainable support to the State Bank of Pakistan in
achieving its objectives.
3.3 Mission
To provide excellent banking and financial services to stakeholders besides ensuring
implementation of SBP policies, to command their trust and respect.
3.4 Objectives:
Acquiring a higher level of satisfaction of stakeholder’s through:
 Improved efficiency
 Reducing processing time
 Friendly attitude towards customers
 Improving effectiveness in policy implementation by SBP
3.5 Key Functional & Operational Areas:
 Currency Management (distribution of fresh currency notes, coins and lifting of soiled banknotes
from the market)
 Promoting digital payments
 Foreign Exchange Operations and Adjudication
 development finance activities in the areas of SME, Agriculture, and Microfinance
 Export refinance Scheme
 Payment and Settlement Systems
 Banking Services to the Federal/Provincial/Local Government and commercial banks
 Promotion and implementation of SBP policies
 Nurturing organization's efficient & dynamic human resource.
 Public debt management i.e. sale/purchase of national prize bonds including managing prize
money draw, sale/purchase of national saving schemes, or any other functions assigned by SBP.

3.6 Regional Offices of SBP-BSC
The sixteen (16) Field Offices of the Bank are split into three Regions:
1. Southern Region (5 Field Offices)
2. Central Region (6 Field Offices)
3. Northern Region (5 Field Offices)
Also, for proper and efficient management of the business relating to the issue of notes/currency,
there exist four Currency Issue Circle Offices of the Bank. The location of these Offices and their
geographical limits are as under:
1) Karachi for Province of Sindh
2) Lahore for Province of Punjab including Government of Azad Jammu and Kashmir
3) Peshawar for Province of Khyber Pakhtunkhwa and Government of Gilgit- Baltistan
4) Quetta for Province of Balochistan
3.7 Governance Structure of SBP-BSC
According to Section 7 (1) of the SBP-BSC Ordinance 2001, general superintendence, direction,
and management of the affairs and business of the SBP-BSC and overall policy-making in respect
of its operations are vested in the Board of Directors which may exercise all such powers and do all
such acts, deeds, and things that may be exercised or done by SBP-BSC. In discharging its
functions, the Board ensures compliance with the orders and directions that may be issued by SBP
from time to time.
i. Board of Directors: The Board of Directors of SBP-BSC comprises of:
 Members of the Board of Directors of State Bank of Pakistan
 Managing Director, SBP-BSC.

The members of the Central Board of Directors of State Bank of Pakistan comprise the Governor
SBP, Secretary Finance, and eight non-executive Directors nominated by the Federal Government.
The Governor SBP acts as the Chairman of the Board. The Directors, at least one from each province,
are appointed by the Federal Government who shall be eminent professionals from the fields of
economics, finance, banking, and accountancy. The Managing Director is appointed by SBP as
mandated under Section 9 (1) of the SBP-BSC Ordinance 2001.
ii. Committees of the Board of SBP-BSC: The SBP BSC Ordinance 2001 allows the Bank to
formulate Committees consisting of such number of Directors, powers, functions, duties, and other
terms of appointment of Committee of Directors as it may determine. These Committees deal with
any matter entrusted to it subject to the general and any special directions of the Board. The Board
is assisted by the following three Committees:
A. Audit Committee of SBP-BSC Board: The Committee assists the Board on issues related to
audit and reviews audit proposals required to be submitted to the Board. The Committee has the
following composition:
1) Mr. Muhammad Saleem Sethi (Chairman)
2) Mr. Atif R. Bokhari (Member)
3) Dr. Tariq Hassan (Member)
B. Human Resources Committee of SBP-BSC Board: The Committee assists the Board in the
human resources area. It reviews all the proposals requiring approval of the Board regarding revision,
modification, or interpretation of human resources policies, and submits its recommendations to the
Board. The Committee has the following composition:
1. Mr. Azam Faruque (Chairman)
2. Mr. Ali Jameel (Member)
3. Dr. Tariq Hassan (Member)
4. Managing Director, SBP BSC (Member)
C. Publication Review Committee of SBP-BSC Board: The Committee assists the Board in
fulfilling its oversight responsibilities relating to the review and approval of the SBP BSC
publications by ensuring the quality, accuracy, and timeliness of the publications. The Committee
has the following composition:
1. Mr. Muhammad Saleem Sethi (Chairman)
2. Mr. Azam Faruque (Member)

3. Managing Director, SBP BSC (Member)
3.8 Management Structure of SBP-BSC
The Managing Director is the CEO of the Bank and, subject to the control and direction of the Board,
administer the affairs of the Bank, and have such powers for this purpose as are from time to time
delegated to him by the Board. The Managing Director is assisted by Directors/ Heads of the
departments and Chief Managers of field office as laid out in the Organogram below.
3.9 Functions of SBP-BSCs
Regional / Field Offices of the Bank typically provide the following Banking Services:
 Currency Management Services (Issuance, Exchange & Destruction of Currency Notes).
 Coins Management (Supply & Receipt).

 Receipts of Governments’ Taxes & Levies.
 Management of Governments’ Payments (Salaries, Pensions & Suppliers).
 Public Debt Management (Management of National Prize Bonds & SSCs/DSCs Schemes on
behalf of Central Directorate of National Savings (CDNS), National Savings, Ministry of
Finance, Government of Pakistan, Islamabad.
 Provision of Governments’ Funds Transfer Facility.
 Locker facilities to the Government for Safe Deposit of Articles.
 Customers’ Facilitation for General Banking Complaints.
 Other Banking Services as and when required by the Government Departments.
3.10 Departments of SBP-BSC
The operational functions have been clustered into four main groups as shown in the organogram
above. Each Group is headed by Group Head (GH), reporting to MD, whereas Directors/Heads of
Departments report to respective Group Heads
 HR and Support Services
i. Human Resource Management Department (HRMD):
It performs functions that are strategically important and critical to SBP BSC including talent
resourcing, employee development, compensation and benefits management, performance
management, and industrial relations. It is further responsible for the continuous review of all
policy aspects of HR/Training & Development areas.
The Department, through its multi-layered strategy, aims to enhance the HR capacity of this
organization through structured talent management and play a major role in the successful
implementation of targeted change management initiatives for organizational transformation.
ii. General Services Department:
General Services Department has been instituted to provide efficient services to the employees of
SBP BSC, through the “One Window” approach. It employees a revived method of the management
to resolve all employees-related issues with a proactive approach and advanced service delivery
standards to inculcate more devotion and commitment in their job performance.
It is responsible for providing cost-effective and quality support services to SBP and SBP-BSC such
as health care services to Bank’s employees and their eligible dependents and processing of
employees’ salary, their retirement & other benefits
Procurement is a major function of the Department and encompasses a wide range including
procurements of IT equipment and services, professional consultancy services, vehicles, office
equipment, furniture & fixtures, medicines, etc.
iii. Engineering Department:

Engineering Department is mainly responsible for the construction, renovation, and maintenance of
buildings, HVAC (Heating, Ventilation, and Air-Conditioning), and equipment of SBP, SBP-BSC,
and NIBAF. It also deals with different Development Authorities of land & buildings concerning
different properties of SBP, SBP-BSC, and NIBAF and also obtains insurance coverage to keep the
Bank indemnified from all possible losses.
iv. Internal Bank Security Department (IBSD):
It strives to maintain an environment that provides security and safety to employees, assets, and
infrastructure of the Bank by using modern security equipment backed by a strong internal security
force. IBSD also liaises with various Security / Law Enforcing Agencies and ensures proper
implementation of security guidelines/instructions across SBP, SBP-BSC, and NIBAF.
 Forex & Development Finance
v. Foreign Exchange Operations Department (FEOD):
Being an operational arm of the Exchange Policy Department (EPD), FEOD is mainly responsible
for facilitating the foreign exchange activities in the country such as monitoring the repatriation of
export proceeds, granting approvals for commercial, private, and Government foreign exchange
remittances, processing of applications under various Subsidy Schemes introduced by the
Government for exporters, etc. and collection & analysis of various returns/data on foreign
exchange-related transactions in the country.
vi. Foreign Exchange Adjudication Department (FEAD):
In pursuance of the amendment made during 1987 in the Foreign Exchange Regulation Act, various
Foreign Exchange Courts were established at SBP-BSC Head Office and its Field Offices. The courts
aimed to formulate an adjudicating process for deciding cases of offenses relating to non-repatriation
of export proceeds within the stipulated period and misuse of foreign exchange.
FEAD manages these Foreign Exchange adjudications (FEA) Courts. There are 9 FEA Courts in
total- 4 in Karachi, 2 in Lahore, 1 in Sialkot, 1 in Faisalabad, and 1 in Multan. These Courts
adjudicate the complaints filed by the complainant i.e. FEOD against the delinquent exporters. These
Courts also adjudicate complaints against Authorized Dealers (Commercial Banks) for violation of
instructions issued by SBP and SBP-BSC.
vii. Development Finance Support Department (DFSD):
DFSD at SBP-BSC has been set up to augment the efforts of SBP in pursuing the development of an
inclusive financial system in the country that can cater to the financial services needs of the
economy’s different segments. It complements the role of the Development Finance Group (DFG)
of the State Bank of Pakistan in:
a. Monitoring, awareness & information dissemination of various SBP’s policies, initiatives, and
schemes through different activities
b. Operational management/ implementation of SBP’s Export Refinance Schemes (EFS), Credit
Guarantees Schemes (CGSs), Prime Minister's Youth Business Loan (PMYBL) Scheme, and
other Subsidy Schemes.

 Network and Financial Management
viii. Accounts Department:
The Accounts Department of SBP-BSC is primarily responsible for the consolidation of accounts
of 16 field offices of SBP-BSC along with the preparation of financial statements for BSC,
preparation and monitoring of annual Revenue and Capital Budgets and managing the assets of
BSC (physical as well as their system data).
Other functions include supervision of banking operations being handled at field offices,
management, and reporting of financial data related to Federal and Provincial Governments’
accounts on required frequencies and consolidation & reporting of FBR taxes and Zakat collection.
ix. Currency Management Department (CMD):
It is responsible for ensuring uninterrupted provision of good quality Bank Notes and Coins,
National Prize Bonds, Special & Defence Saving Certificates across the country. CMD also
ensures retrieval of unfit banknotes from circulation and their destruction through systematic and
secure processes as part of SBP’s Clean Note Policy.
With the help of different Field Offices of SBP-BSC, it also arranges public awareness programs
for external stakeholders such as commercial banks, the general public, and key Government
Institutions to disseminate information about the “security features of bank notes in circulation”
and “SBP’s Clean Note Policy”. The purpose of such programs is to help the stakeholders in
combating the circulation of counterfeit notes and also ensuring the circulation of clean notes in the
market. Additionally, CMD also collaborates with Law Enforcement Agencies for measures to
deter counterfeiting of currency notes while continuously upgrading its capacity to check
counterfeiting through the use of better equipment and establishing a forensic lab.
It also provides feedback to the concerned Department(s) of the SBP related to:
a. Forecasting the demand for fresh notes and coins, based on factors like past consumption
trends, expected growth of the economy, etc.
b. Improving the security features in currency notes
c. Indenting and printing of bank notes.
For the purpose, it coordinates with Pakistan Security Printing Press (PSPC), Pakistan Mint,
Central Directorate of National Savings (CDNS), and National Bank of Pakistan (NBP).
 Direct Reporting To MD
x. Internal Audit Department (IAD):
It provides management and the Audit Committee of the Board of SBP-BSC with reasonable
assurance that the organization’s risk management and control systems are adequate and operating
effectively. IAD performs a wide range of audits including financial, compliance, operational and
IT audits, through Annual Inspection Teams as well as regional Audit Hubs.
xi. Strategic and Corporate Affairs Department (SCAD):

SCAD is entrusted with the role of supporting the Corporate Governance Framework of SBP-BSC.
For the purpose, it houses BSC’s corporate secretarial function and therefore assists the Board of
Directors and its Committees to perform their role. Accordingly, the Department acts as a medium
between the Board and the Management, to ensure that the Board’s decisions are implemented in
letter and spirit. It also coordinates and monitors the Business Planning exercise along with
facilitating the Business Process Reengineering (BPR) activity through its Systems and Procedures
Division (SPD) to improve the effectiveness and efficiency of BSC’s operations.
3.11 Products/Services of SBP-BSC
SBP-BSC provides different types of products and services to its customers which are as follows.
3.11.1 Asset Base Products/Services
o Rupee Coins
o Bills of Exchange Purchases and discounted
o Govt. Treasury Bills
o Loans and Advances to Govt.
o Loans and Advances to schedule Banks
o Loans and Advances to Non-Bank Financing Institutions
o Investments in Schedule Banks, NBFCs & Govt. Securities
3.11.2 Liability Base Products/Services
o Notes
o Deposits of Federal Govt.
o Deposits of Provincial Govt.
o Deposits of Banks
o Deposits of Others like NBFCs.
o Bills Payable
o Housing Credit Fund
o Export Credit Fund
o Industrial Credit Fund
o Rural Credit Fund

Chapter 4 SBP BSC Peshawar
4.1 History
Initially, an Issue Department of SBP started its functions in Peshawar in April 1948, to be replaced
by a fully functional office a year later in April 1949. The government of NWFP (present KPK)
provided its complete assistance in the establishment of the Office and even volunteered to place
several houses at the disposal of the Office in 1949-50 for the accommodation of staff transferred
from Lahore to Peshawar. The bank moved to the present premises on 2nd May 1984, which was
inaugurated by Lt, Gen Fazal-e-Haq, Governor, NWFP (present KPK).
4.2 Divisions of SBP BSC Peshawar
The main divisions, their functions, and heads are described below:
4.2.1 Issue and Treasury (Cash) Division:
Headed by: Currency Officer
Functions:
o Payments and Receipts on behalf of Government
o Issuance and exchange of Currency Notes
o Issuance of Commemorative Coins and other coins
4.2.2 Banking Division
Headed by: Sr. DCM
Functions:
o Receipts and Payments on behalf of Government
o Maintaining Current Accounts of Banks
o Management of Income & Expenditure Accounts
o Preparation of Trial Balance, Profit & Loss Account, Balance Sheet
o Reconciliation of Accounts
o Opening of L/Cs on behalf of Govt. Departments
4.2.3 Prize Bond and Securities Division
Headed by: Sr. DCM
Functions:
o Payment of Prize Money
o Maintenance of record of Prize Bonds in circulation
o Conducting Draws of Prize Bonds
o Sale & Encashment of SSC and DSC
o Payment of Profit
o Sale and Encashment of Prize Bonds

4.2.4 Development Finance Division
Headed by DCM
Functions:
o Monitoring and implementation of SBP financing schemes
o Target monitoring of agricultural financing
o Operations of conventional EFS and IERS (Part‐I & II), LTF‐ EOP and LTFF, refinance
scheme for modernization of SMEs
o On‐site verification of Export Finance Schemes (EFS) and the Credit Guarantee Scheme
(CGS) cases.
4.2.5 Foreign Exchange Operations Division (FEOD)
Headed by Jr. Joint Director
Functions:
o Monitoring Exports, Imports, Foreign Exchange Transactions, and payment of subsidies
against exports
o Checking of various forms received for Authorized Dealers to monitor the flow of Foreign
Exchange
o To ensure the repatriation of export proceeds
o Adjudicating of disputed cases
o Imposing of Penalties
4.2.6 Administration Division
Headed by DCM
Functions:
o Management of HR Resources
o Rotation of HR as per policy
o Digital maintenance of employees’ data in HRMS EIM and Leave Modules
o Discipline
o Training
o Promotions
o Internal Bank Security
o Procurement of new equipment
o Floating tenders for new projects
o Repair and Maintenance of office buildings and equipment

4.3 Organogram of SBP BSC Peshawar
Chief
Manager
Senior Deputy
Chief Manager
(Banking/DFD)
ACM
PAU/DAU/
DFD
Currency
Officer (Issue
& Treasury)
ACM/DCO
Treasury
Cash
CAU/CMU/
CMEU
Vaults
SVPU/CNVU
Deputy Chief
Manager
(Prize Bond)
ACM
PBU/PBV
Deputy Chief
Manager
(Admin)
ACM
SMU
Payroll/
Advances/
Medical
Welfare
GSU/IBSU/
Eng. Unit
Joint Director
(FEOD)
Deputy
Director
FEOD
Deputy Chief
Medical
Officer
(DCMO)
Sr. Deputy
Chief
Manager
(IMU)

4.4 Rotational Internship in SBP BSC Peshawar:
To get optimum exposure and learning experience we were rotated in various units for a period of
total 08 weeks, which are described below:
 Issue and Treasury (I & T)
4.4.1 Currency Management Unit (CMU)
Currency Management Unit, (CMU) is responsible for managing the currency distribution and its
stocking across the country. It also formulates and implements the policies related to
(a) Distribution of fresh notes and coins.
b) Inventory management of currency notes, coins, and prize bonds.
(c) Withdrawal of soiled Notes from circulation and their destruction.
(d) Note exchange facilities; and
(e) Implementation of SBP’s Clean Note Policy to issue fresh/good quality notes to the public and
the government itself.
For transparent issuance of fresh/good quality banknotes to all stakeholders, CMU makes
coordinated arrangements in association with chests/sub-chests of the National Bank of Pakistan,
selected branches of commercial banks, and sometimes even from counters of BSC field offices. An
adequate quantity of fresh notes is also issued regularly to all commercial banks according to their
branch network.
Besides, fresh notes of higher denominations are also regularly issued to commercial banks for
feeding the ATMs. Despite providing adequate currency denominations across the country,
Currency Management also involves maintaining the quality of notes in circulation through
continuous sorting, discarding, and replacing the soiled notes with fresh notes through chest
operations.
Currency Management Process
Note Categories:
Issuable Notes: Non – Issuable Notes
Fresh Notes Soiled Notes/ Mutilated/ Defective/Charred Notes
Re – Issuable Notes Claim Notes
Indent Production Distribution Circulation Sorting Destruction

The life cycle of Bank Notes
4.4.2 Currency Account Unit
It deals in two accounts basically;
a. Home note account: tells us about liabilities o SBP. It is further divided into sub-accounts:
 Stock Account which tells us about fresh notes in stock, after printing from PSPC.
 Exchange Account tells us about what amount of money comes and goes in exchange. Either
people bring it on the counter.
 Chest Note Account tells us about money that is present in chests. All chests send their balances
of all denominations with them to BSC Peshawar.
 Invoice Account shows which chests send bank money to BSC Peshawar e.g. Non-issuable
notes.
 Canceled Note Account it is a technical account that shows which notes are issuable and brought
back.
 Circulation Account shows the amount of money that changes hands. Banknotes which the
government of Pakistan makes e.g. oil 1 to 5 rupee notes are written on it. Foreign Reserves are
maintained against circulated money.
 Currency Account all accounts are included in the currency account. Notes are removed from
currency account when they are transferred from one issue circle to the cities.
b. Value account: tells us about assets of SBP. All coins and reserves are maintained in this account.
The total amount of value account must be equal to that of the circulation account.
Annual indent by SBP
Pakistan Security
Printing Corporation
SBP BSC
Banks/ Chests General public
Soiled

Peshawar issue circle oversees the 26 currency chests of the province. There are 26 districts in KPK
hence 26 currency chests of SBP-BSC Peshawar are undertaking their operations through NBP.
These chests are overseen by the Currency Accounts Unit (CAU) of SBP BSC Peshawar.
4.4.3 Treasury Cash Unit
This unit is responsible for carrying all transactions, which are related to Cash on behalf of the
Government, Commercial Banks, and Other Institutions.
Functions:
 Physically receipts/payments on behalf of Government and Commercial Banks.
 Sale/Encashment of Coins.
Counters:
 Coin Counter: Sale/Encashment of Coins
 Government Counter: Receipts/Payment on behalf of Government
 Exchange Counter: Exchange of Currency Notes.
 Defaced/Defective Counter: Exchange of Defaced/Defective Currency Notes
 Banking Counter: Receipts/Payments on behalf of Commercial Banks through the instrument.
 National Prize Bonds Counter: Sale/encashment of National Prize Bonds.
4.4.4 Prize Bonds Unit (PBU)
Sale and encashment of prize bonds of various denominations of prize bonds and payment of prize
money were the areas where SBP BSC deploy all resources to administer the scheme efficiently.
SBP also managed other schemes of CDNS. Sale, encashment, and profit payments of Special
Saving Certificates (SSC), Defense Saving Certificates (DSC).
PBU (Prize bond unit) performs different operations regards prize bonds.
 Such as issuing of prize bonds to encashment.
 T24 software performs all these core functions.
Main functions:
 Printing of Prize Bonds through Pakistan Security Printing Corporation (PSPC)
 Issuance of different denominations of prize bond.

 Management and Control under the provisions of Prize Bonds Rules/Procedure of
sale/encashment of Prize Bonds.
 Management and Control National Savings Schemes through offices of SBP BSC and
Commercial Banks.
 Dealing with the cases of frauds and forgeries in the Prize Bonds scheme.
 Preparation of position of sales/encashment of Prize Bonds on a weekly/fortnightly basis and
weakly/monthly position of National Savings Schemes or such internals as required by the
Central Directorate of National Savings, Government of Pakistan.
 Planning and arrangements for Prize Bonds draw as per schedule.
 Registration of premium prize bond.
 Transfer of profit of premium bond to customer accounts.
 Prize money claim.
 Authorization of prize money claim.
 Claim money transfers to customer bank accounts.
4.4.5 Deposit Accounts unit (DAU)
DAU is responsible for maintaining the Bank’s Accounts and provide the Remittance to Banks.
DAU performs 3 main functions which are:
 Banking services to a commercial bank.
 Local remittances.
 Zakat account
Main functions:
 SBP-BSC acts as a banker to banks. Commercial banks open their accounts with SBP. There are
accounts of various banks and these accounts are maintained at the deposit account unit.
 The facility of remittance of government payments is provided through this department
 Account reconciliation
 Also, facilitate public remittances, and a fee is charged for that whereas no fee is charged from
the government.
DAU serves two main stakeholders:
I. Government Departments: DAU maintains an account of Zakat on a provincial and federal
level and commercial banks as well. These transactions are done through T24 software. Daily,
many checks are presented by commercial banks and government departments. All the records

regard those presented checks are kept in T24 software.
II. Commercial Banks: It performs the function of banker to banks. 30-36 commercial bank
accounts are maintained with DAU. It registers 2 or more signatories of a commercial bank for
operating their current account. This is a joint operation, so both signatories should sign the
cheque and other instruments.
SBP BSC Peshawar opens and maintains accounts of commercial bank’s main branches located
in Peshawar. Commercial banks deposit their balances at the end of each day and then withdraw
the next day. These deposits and withdrawal are done through predetermined procedures. Which
are:
 Check Clearance Procedure
Before any withdrawal by a commercial bank’s representative, some pre-requisites are mentioned
below.
1. Verification of signatory’s signatures is done through T24 software. Signatures of authorized
persons are linked with their accounts. When the check number is entered into the system. Then
with a specimen which had taken at the time of opening an account, the signatures are cross-
matched with the signatures presented on the check.
2. The balance of the concerned commercial bank is checked in their account. The system keeps
track of the balance in the account. In case the amount of entry exceeds the available balance,
the system provides an overriding message of “Unauthorized Overdraft” and alerts the user not
to commit the entry.
3. The system keeps track of the cheque number. Separate cheque books are issued to every
commercial bank and the entry is recorded in the system. If a commercial bank presents the
cheque that was issued to another bank, the system will not process the entry with an overriding
message of “Cheque not in Register”.
4. Checked whether it is to be :
a) Paid in cash.
b) Transfer to another account (TT facility).
 Local Remittances Procedure
DAU maintains an account of local remittances as well. The balances are transferred through 4
methods to other accounts. Which are:

o GD (Government Draft) & BD (Bank Draft)
Government draft and Bank drafts are paper-based drafts. These drafts are printed in DAU. Then
this instrument is hand over to the concerned person to present it in the concerned bank to receive
his payment.
GDs are issued to Government departments for remittance of funds from one place to another while
the BD facility is available to individuals. The system is smart enough to recognize the account to
which the funds are transferred i.e. in case the draft is drawn on a branch of NBP, the Head Office
account is credited and if the draft is drawn on an office of SBP BSC, the draft account of concerned
office is credited in the books generating a liability for that office.
 MT (Mail Transfer) & TT (Telegraphic Transfer)
MT & TT are paperless instruments. There is no need for printing of payment orders just like a GD
& BD.
When the form for TT is presented, the balance is transferred to the account of the head office of the
concerned commercial banks maintained in SBP BSC Karachi. In the case of Mail Transfer, upon
authorization of entry, a Payment Order entry is automatically generated in the name of the transferee
in the books of SBP BSC Office on which the MT is drawn.
4.4.6 Public Account Unit (Banking services to governments):
SBP BSC under clause 21 of SBP Act 1956 and 15(3) e of the SBP BSC Ordinance 2001 provides
banking services through a network of field offices across the country to the Government on behalf
of State Bank of Pakistan. These services include:
 Collection of revenue and making payments on behalf of Government Departments
 Reporting of transactions of revenue collection to the Federal Board of Revenue (FBR) daily
through an online network under Collection Automation Project (CAP).
 Making settlement of government payments and receipts made by NBP as an agent to the SBP.
 Remittances facilities to the government for the transfer of funds. The facility of transfer of funds
of government departments from one place to another.
 Payment of pensions to the pensioners of various government departments.
 The facility of safe deposit of articles to government departments, banks, etc. on nominal
charges.
 Other banking services as and when required by the government departments.
Account Maintenance: The PAU of SBP-BSC Peshawar is responsible for the maintenance of
 The Federal Govt A/C
 Provincial Govt A/C

 Local Governments
 Zakat
 Defense A/C
 Special Transfer A/C (Used to Pay Pakistan Army Performing Their Duties Abroad)
 U N A/C (Used to Pay Pakistani Civilians Performing Their Duties Abroad)
The data about government transactions carried in various accounts are reported to the Accountant
General of the provinces, Accountant General Pakistan Revenue (AGPR), Pakistan Railways, and
other concerned departments on a daily/ periodic basis.
Main operations:
PAU's main operation is to maintain different government department accounts. Government checks
are presented daily in PAU for encashment. PAU maintains three main accounts which are
mentioned below.
a. Drawing Account
 Drawing account is a general account
 The drawing account has no limit of withdrawal. These accounts can be over-drafted if required.
 Drawing accounts consist of provincial, federal, military, food departments, AGPR, and forests.
 Mapping (drawing, personal ledger, or assignment account) is important at the time of opening
an account.
 When the check is presented. The check number is put in the system which will recognize the
status and nature of the account.
 The State Bank has to pay what is drawn on it.
 The Balance of this account may be in Debit or credit.
b. Personal Ledger Account
 The government of Pakistan allocates a specific and limited Budget for different government
institutions. Those institutions are entitled to draw the amount up to the extent of their budget
 These are the accounts of autonomous bodies such as hospitals, Zakat, and educational, etc.
 Treasury payment order is necessary for payment. The cheque must be endorsed by Federal
Treasury Officer (FTO)
 The State Bank of Pakistan has the right to dishonor the cheque without the endorsement.

 The cheque drawn on this account has a validity of one month from the issuing date.
 Treasury payment order is then recorded in the system.
c. Assignment Account
 This account is like a Personal ledger account and is entitled to agencies like ISI, FIA, etc.
 Such kind of accounts has a limit. At the start of the financial year, a specific limit is mentioned
for the concerned government account.
 Assignment account consists of GPO, District Account four, military, and specific projects.
Operational sides of PAU:
PAU has 2 operational sides, which are given below:
a. PAU Payment:
Payment on behalf of Government through instruments, the major functions performed by the
Payment account Unit are:
 Maintenance of Government Department accounts.
 To keep specimen signatures of drawers/DDO’s records up to date.
 To maintain cheques Series advice.
 Stop cheques.
 To maintain schedule/advice.
 Pass cheques/Bills etc.
Available modes for payment: Cash, clearing, and Transfer.
Payment instruments: Cheques, Bills like pension bills, Payment Order, and TCs.
 Types of payments:
1) Payment over the Counter: Payment over the counter means the payment of the required
amount in cash in SBP-BSC. The procedure for over the counter payment is given as follows.
 Verification of cheque:
o The cheque issued for encashment must be drawn by the Drawing and Disbursing Officer (DDO)
of the concerned department.
o The DDO may authorize a person for the collection of payment.
o The signature of DDO, the name and picture of the person to whom DDO has authorized must
be recorded with SBP.

o The Cheque must be endorsed by DDO from the backside of the Cheque with a stamp of Cash
received.
o Only these DDO or his authorized person is entitled to receive cash.
o A Schedule must be sent by the instrument issuing authority to State Bank of Pakistan for the
verification of issued cheques.
o The State Bank of Pakistan is entitled to refuse to pay without a schedule.
o The Schedule must contain
 Information about Drawee.
 Information about the Amount of Cheque.
 Information about Drawer.
 Information about Issuing Date.
 The particulars of the cheque must match with the schedule
 Recording of Transaction:
A token is issued against the receiving of cheque/s. The token No. and the number of cheque/s
received against that token is also recorded in the transit book. Only the complete and satisfied
transactions are recorded in Transit Book. After recording the book is sent to the cash counter with
a messenger, where the payment is made.
2) Payment through Clearance:
In payment through clearance, the amount from the government account is shifted to the receiver’s
account and no cash is paid. Duration of clearance and its transfer to the receiver’s account depending
on the issuer and receiving bank locations. It may take from 3 to 7 days depending.
SBP has given a mandate to National Institutional Facilitation Technologies (Pvt) Limited (NIFT)
to act as a clearinghouse. NIFT has a network throughout the country. It collects cheques from
collecting banks where a cheque is presented, sort them, and save data through the automated
machines and then send them to the issuing banks for their settlement.
The clearing services offered by NIFT include:
a. Normal Clearing: The clearing is made within 3 days.
b. Same Day Clearing: The clearing is made on the same day. However, the bank charges extra
charges for same-day clearing.
c. InterCity Clearing: This is to facilitate clearing within cites. Normally required 3 to 7 days.

The same procedure is adopted for government payments; NIFT collects cheques of Government
accounts from presenting banks and send them to BSC for settlement. The cheque is matched with
the schedule of the issued department, and the Genuineness of the instrument and signatures of the
DDO is verified. The issuing department’s account is debited, and the concerned bank’s account is
credited as per cheque amount.
3) Transfer:
Here the amount is transferred through book entry from one account to another. For Example, the
federal government wants to transfer funds to the provincial government account. The SBP having
accounts of both federal and provincial governments transfer the funds by making book-entry while
debiting the federal government account and crediting the provincial government account.
b. PAU (Receipts)
This side is responsible for keeping accounts of money paid into SBP BSC for credit to Government
Account (Central and Provincial).
All money that is tendered at the bank for credit to Government Account should be accompanied by
Treasury Challan in the form of prescribed by the Government. Concerned are permitted to be
deposited by the member of the Public direct into the Bank for credit to Government Accounts Such
as Income Tax and Sales Tax Deposits. All Challan requires to be counter-signed by Treasury
Officers or Head of the Government Department on whose account the amount paid.
The Public Account Unit also Collect various receipts from on behalf of the provincial and central
government. The receipts are also collected through the above-discussed methods i.e. Cash, Clearing,
and transfer.
1) Cash: Various types of taxes like income tax; property taxes etc. are generally collected in the
form of cash from the public.
2) Clearing: Here the 3rd party i.e. Bank is involved in the collection. For example, NBP to collect
cash/ revenue of the government on behalf of SBP.
3) Transfer: Here the amount is transferred through book entry from one account to another. For
Example, the federal government wants to transfer funds to the provincial government account.
The SBP having accounts of both federal and provincial governments transfer the funds by
making book-entry while debiting the federal government account and crediting the provincial
government account.

4.4.7 Foreign Exchange Operations Department (FEOD):
FEOD of SBP BSC provides operational support to the Exchange Policy Department of SBP. The
department monitors and oversees the foreign currency operations of commercial banks dealing in
foreign exchange transactions. It also facilitates exporters in various incentive schemes announced
by the Federal Government in coordination with SBP for increasing export receipts.
Three main sections in the foreign exchange unit are Export, Import, and Return
4.4.8 Access to Finance Unit (AFU):
Development Finance Support Department was created in 2007 to support the Development Finance
Group of SBP for achieving its major objective of facilitating the expansion of financial services to
all segments/ sectors of the economy. Ever since it has been able to act as an effective medium for
reaching the unbanked/ under-banked segments of the society and connecting them with the
country’s financial markets. AFU is a unit of this department that Conducts & monitors of National
Financial Literacy Program (NFLP) under the Financial Inclusion Strategy (FIS) of SBP.
Its functions include:
o To organize programs/field visits/workshops/seminars to create awareness amongst the target
population about financial institutions.
o Conduct of awareness sessions on various low-cost schemes of SBP as well as on financial
literacy to stakeholders
o To develop and maintain region and district wise development database; to optimally target the
resources to increase the outreach of financial services in un-banked/under-banked areas/sectors.
o To collect regional and branch wise data for assessing the bank's performance as well as to study
regional trends in growth and development of SMEs, Micro, and Rural Finance.
o To develop linkages with SMEDA, representatives/associations of SMEs, farming community,
chambers of commerce and agriculture, trade bodies for better and wider dissemination of SBP
development Finance policies and approach.
o To conduct/arrange/sponsor regional surveys on key issues relating to expansion, growth, and
impact of development finance.
o Research/studies in the field of Financial Inclusion
o Conduct of Internship Programs
o Conduct of In-house training for employee

4.4.9 Refinance Scheme Unit (RSU):
To increase the exports of Pakistan, SBP has started a financing scheme to exporters known as
Exports Refinance Scheme. Under this scheme, a loan is granted to the exporter at a low-interest rate.
Commercial banks act as an intermediary between the exporter and the SBP and charges 2% of the
interest as its commission whereas the rest goes with the SBP. The loan is usually granted for 180
days. After 180 days the SBP credits the account of that commercial bank and notifies it about that
(regardless of the payment made or not). If the exporter pays before 180 days, then that bank is liable
to pay to SBP within 72 hours.
Any exporter can avail of the Export Finance Facility through any of the commercial banks, after
fulfilling the collateral requirements of the bank. The decision to lend shall be taken by the bank
under its own internally approved credit policy.
Pre-shipment financing: It is the financing to the exporter before the shipment occurs.
Documents required: L.C or purchase order, Agreement, and Demand Promissory Note (D.P note).
Post shipment financing: This is the financing after the shipment had occurred.
Documents required: Purchase order, D.P Note, Agreement, and Shipment document.
Other financing schemes of SBP include
 Refinancing Facility for Modernization for SMEs
 Financing Facility for Storage of Agricultural Produce
 Long Term Financing Facility for Plant & Machinery
 SBP Financing Scheme for Renewable Energy
4.4.10 Staff Matter Unit (SMU):
SMU deals essentially with Human Resource and its related issues. Its main functions are:
 Staff data in HRMS and maintaining its confidentiality
 Job Rotations/ Transfer/ Posting in BSC
 Dealing with the cases of transfer/posting/Disciplinary matters.
 Preparation of Seniority List and Grant of Annual Merit Increase.
 Cases of retirement, dismissal, resignation, and death of the employees.
 Maintenance of Leave record of all the employees in HRMS /preparation of Rest &
Recreation Plan and payment of Allowance.
 Leave Encashment etc.
 Non-Payroll matters (Education, Marriage/Funeral, etc.)
 Retirement benefits (including an increase in Pension etc
 Arrangements of Training

 Issuance of NOC / Service Certificate
 SBP Merit scholarship schemes up to OG-2
 Educational documents verification
 Employees Welfare Trust
4.4.11 General Services Unit (GSU):
It comprised of procurement of goods and services transparently under the framework of Public
Procurement Rules-2004. During FY19, goods, and services worth approximately Rs 1,252 million
were procured in different categories. SBP BSC also manages the printing of important journals and
remained focused to provide quality health care services to employees of SBP and SBP BSC in a
cost-effective manner.
Future Outlook: SBP BSC is adopting an online procurement system under E-Procurement Project
for its procurement function. This will not only enhance the transparency in the procurement
processes but will also improve the participation of prospective bidders. To harmonize the
procurement practices, bidding documents will be standardized across SBP BSC offices followed by
targeted training programs.

PART III ANALYSIS
Chapter 5 Financial Analysis
5.1 Financial Analysis
The financial analysis enables the analyst to compare items on a single financial statement or to
examine the relationships between items on two financial statements. After calculating ratios for
each year's financial data, the analyst can then examine trends for the company across the years.
Since ratios adjust for size, using this analytical tool facilitates intercompany as well as inter-
company comparisons.
5.2 Ratio Analysis
Ratio analysis measures inter-relationship between various items of financial statements. Ratios are
taken as guidelines for these are useful in evaluating a company’s financial position and operation
and making comparisons with results in previous years or with others in the same industry. The
primary objective of ratio analysis is to point out areas requiring further investigation. Ratios are
calculated from the following financial statements and relevant notes to accounts.
 Balance Sheet
 Profit and Loss Account
 Statement of Changes in Equity
 Cash Flow Statement
5.2.1 Liquidity Ratio
Liquidity ratios These ratios analyze the short-term financial position of a firm and indicate the
ability of the firm to meet its short-term commitments (current liabilities) out of its short-term
resources (current assets).
Current Ratio
The Current Ratio is a liquidity ratio that measures a company's ability to pay its debt over the next
12 months or its business cycle. The current ratio is a measure of the current adequacy of the
company's current assets to meet its current obligations. It must be greater than 1. If it is less
than 1, liabilities exceed current assets.
Current ratio= Current Assets / Current Liabilities
Table 1 Current Ratio
Years Current Assets Current Liabilities Current Ratio
2015 1,746,309,246 3,142,557,265 0.55
2016 2,337,546,723 4,210,011,446 0.55
2017 2,127,739,101 4,397,250,395 0.48
2018 1,721,970,794 4,874,560,790 0.35
2019 1,973,682,273 6,521,183,815 0.30

Figure 1
Interpretation:
During the period 2015-2019, the current ratio stays constant from the year 2015 to 2016 and then
falls till 2019. A good current ratio is between 1.2 to 2, which means that the business has 2 times
more current assets than liabilities to covers its debts. While the ratio of 0.3, on the other
hand, indicates that a bank has more than twice current liabilities as compared to quick assets, it
will have trouble paying current liabilities.
5.2.2 Financial Leverage/ Solvency Ratio
A class of ratios that measure the indebtedness of a firm. A leverage ratio is any kind of financial
ratio that indicates the level of debt incurred by a business entity against several other accounts in
its balance sheet, income statement, or cash flow statement. These ratios indicate how the
company’s assets and business operations are financed (using debt or equity).
Debt ratio
The debt ratio measures the proportion of assets financed by outsider’s money. The higher the ratio
the greater the amount of other people’s money being used to generate the revenue
Debt ratio=Total Liabilities/Total Assets
Table 2 Debt ratio
Years Total liabilities Total assets Debt ratio
2015 4,693.561,349 5,222,921,922 0.898
2016 5,818,688,741 6,438,547,063 0.903
2017 6,275,457,724 6,886,558,106 0.911
2018 7,182,217,175 7,757,006,493 0.925
2019 10,745,163,599 11,488,050,678 0.935
0.55 0.55
0.48
0.35
0.3
0
0.1
0.2
0.3
0.4
0.5
0.6
2015 2016 2017 2018 2019
Current Ratio
current ratio

Figure 2
Interpretation:
The above table shows that the State bank of Pakistan has increased debt ratio almost for
the whole period 2015 to 2020. But in the year 2019 table shows that Bank’s assets are
financed up to 93% by the credit money that is not a good sign because it reduces the
confidence of investors and this is acceptable up to 60% only. This ratio shows that the
bank has taken so many loans to run its affairs which is alarming for the country’s economy.
Asset to Equity Ratio
The asset/equity ratio shows the relationship of the total assets of the firm to the portion owned by
shareholders. This ratio is an indicator of the company’s leverage (debt) used to finance the firm.
The shareholder’s equity ratio indicates how much of a company's assets have been generated by
issuing equity shares rather than by taking on debt. The lower the ratio result, the more debt a
company has used to pay for its assets. The closer a firm's ratio result is to 100%, the more assets it
has financed with stock rather than debt.
The ratio is an indicator of how financially stable the company may be in the long run.
Asset to Equity ratio = Total Equity / Total Assets * 100
Table 3 Asset to Equity Ratio
Years Total Equity Total liabilities Asset to Equity ratio
2015 529,360,573 4,693.561,349 11.27%
2016 619,858,322 5,818,688,741 10.65%
2017 611,100,382 6,275,457,724 9.73%
2018 574,789,318 7,182,217,175 8.0%
2019 742,887,079 10,745,163,599 6.91%
0.898
0.903
0.911
0.925
0.935
0.87
0.88
0.89
0.9
0.91
0.92
0.93
0.94
2015 2016 2017 2018 2019
Debt Ratio

Figure 3
Interpretation:
The asset to debt ratio has been falling from the period of 2016 till 2019, where it reached its
lowest value to date i.e. 6.91%. The higher the ratio is, the greater the firm's debt. There is no
ideal ratio to aim for, as all firms have different tolerance for debt.
Debt to Equity Ratio
The Debt to Equity ratio (also called the “debt-equity ratio”, “risk ratio”, or “gearing”), is a leverage
ratio that calculates the weight of total debt and financial liabilities against total shareholders’
equity. This ratio highlights how a company’s capital structure is tilted either toward debt or equity
financing.
Debt to Equity Ratio = Total Liabilities / Total Equity
Table 4 Debt to Equity Ratio
Years Total liabilities Total Equity Debt to Equity ratio
2015 4,693.561,349 529,360,573 8.86
2016 5,818,688,741 619,858,322 9.38
2017 6,275,457,724 611,100,382 10.26
2018 7,182,217,175 574,789,318 12.49
2019 10,745,163,599 742,887,079 14.46
Figure 4
11.27%
10.65%
9.73%
8.00%
6.91%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
2015 2016 2017 2018 2019

Interpretation:
The debt to equity ratio has been rising consistently from 2015 till 2019, where it reached its peak
at 14.46. A higher D/E ratio means that more of a company's financing is from debt versus issuing
shares of equity, which subjects the SBP to potential risk if debt levels are too high.
5.2.3 Coverage Ratio
Coverage ratios are important financial ratios from the viewpoint of the long-term creditors and
lenders. A coverage ratio measures a company's ability to service its debt and meet its financial
obligations such as interest payments or dividends. The higher the coverage ratio, the easier it should
be to make interest payments on its debt or pay dividends.
Interest Coverage Ratio
The interest coverage ratio is a measure of the number of times a company could make
the interest payments on its debt with its earnings before interest and taxes. This ratio
shows whether the firm can meet its contractual interest payment. The higher the ratio the
higher the ability to make its interest payment.
Interest coverage earned ratio = Operating Income (EBIT) / Interest Expense
Table 5 Interest Coverage Ratio
Years Operating income Interest expense Interest coverage
ratio
2015 440,503,799 21,000,191 20.97
2016 270,135,639 25,454,480 10.61
2017 279,739,181 21,368,844 13.09
2018 223,292,364 31,839,115 7.01
2019 50,829,119 110,759,499 0.45
8.86
9.38
10.26
12.49
14.46
0
2
4
6
8
10
12
14
16
2015 2016 2017 2018 2019

Figure 5
Interpretation:
The interest coverage ratio decreased from the year 2015 to 2016 and then increased for the year
2017. After that, it started to drop till 2019 where it reached 0.45. Since a high ratio indicates that a
company can pay for its interest expense several times over, while a low ratio is a strong indicator
that a company may default on its loan payments. So, for SBP, there is a greater chance it will not
be able to service its debt, putting it at risk of bankruptcy.
5.2.4 Efficiency/Profitability/Performance/ Return Ratio
Profitability ratios are a class of financial metrics that are used to assess a business's ability to
generate earnings relative to its revenue, operating costs, balance sheet assets, and shareholders'
equity over time, using data from a specific point in time
 Margin Ratios
Operating Profit/income Margin
Operating Profit Margin is a profitability or performance ratio that reflects the percentage of profit a
company produces from its operations, before subtracting taxes and interest charges. A healthy
operating margin is required for a company to be able to pay for its fixed costs, such as interest on
the debt.
Operating profit margin=Operating profit / Revenue (interest) * 100
Table 6 Operating Profit Margin
Years Operating profit Revenue Operating profit margin
2015 440,503,799 304,300,521 144.75%
2016 270,135,639 252,789,943 106.86%
2017 279,739,181 260,827,528 107.25%
2018 223,292,364 321,222,163 69.51%
2019 50,829,119 656,468,011 7.74%
20.97
10.61
13.09
7.01
0.45
0
5
10
15
20
25
2015 2016 2017 2018 2019
Interest Coverage Ratio

Figure 6
Interpretation:
During the period 2015-2019, the operating profit margin decreases up to the year 2016 and then
increases for the year 2017 and then again sharply falls till the year 2019. A higher operating
margin is more favorable compared with a lower ratio because this shows that the company is
making enough money from its ongoing operations to pay for its variable costs as well as its fixed
costs. So, the lower ratio of SBP is a potentially risky figure.
Net Profit Margin
A ratio of profitability calculated as net profit divided by revenues. A higher profit margin indicates
a more profitable company that has better control over its costs.
Net profit Margin=Net Profit / Revenue * 100
Table 7 Net Profit Margin
Years Net profit Revenue Net profit margin
2015 401,751,564 304,300,521 132.02%
2016 229,261,242 252,789,943 90.69%
2017 237,951,218 260,827,528 91.23%
2018 173,551,930 321,222,163 54.03%
2019 -846,146 656,468,011 -0.128%
Figure 7
144.76%
106.86% 107.25%
69.51%
7.74%
0.00%
50.00%
100.00%
150.00%
200.00%
2015 2016 2017 2018 2019
Operating Profit Margin
Operating Profit Margin

Interpretation:
During the period 2015-2019, the net profit margin decreases up to the year 2016 and then
increases a fraction for the year 2016 and then again decreases till 2019, where it touches
a negative figure. Since Net profit margin is the percentage by which the company's
total revenue exceeds or is less than its overall expenses. A positive net profit margin demonstrates
that the company is running in profit whereas a negative ratio indicates that the company is making
less money than it is spending. So, a negative net profit margin is representing that SBP was
unprofitable during the year 2019.
 Return Ratios
Return on Assets (ROA)
An indicator of how profitable a company is relative to its total assets. ROA gives an idea as to how
efficient management is at using its assets to generate earnings. Calculated by dividing a company's
annual earnings by its total assets, ROA is displayed as a percentage.
Return on Assets = Net Profit after Tax ∗ 100
Total Assets
This ratio expresses the capacity of earning profit by a bank on its total assets employed in the
business. It is calculated as a percentage of net profit after tax to total assets.
Table 8 Return on Assets
Years Net profit Total assets Return on assets
2015 401,751,564 5,222,921,922 7.69%
2016 229,261,242 6,438,547,063 3.56%
2017 237,951,218 6,886,558,106 3.45%
2018 173,551,930 7,757,006,493 2.24%
2019 -846,146 11,488,050,678 -0.0073%
132.02%
90.69% 91.23%
54.03%
-0.13%
-20.00%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
140.00%
2015 2016 2017 2018 2019
Net Profit Margin
Net Profit Margin

State Bank of Pakistan SBP BSC Peshawar Internship report 2020

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