State Bank of Pakistan, BSC Internship Report

SBP-BSC LHR Export Refinance Scheme (EFS)
HAILEY COLLEGE OF BANKING & FINANCE, UNIVEFSITY OF PUNJAB LAHROE
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STATE BANK OF PAKISTAN
Banking Services Corporation (Bank), Lahore
IN RESPECT OF:
Chief Manager
SUBMITTED BY:
Muhammad Abdul Ghafar (MBA)
Hailey College of Banking & Finance, PU
2016
EXPORT REFINANCE DIVISION
PART-II
SBP-BSC (BANK), LAHORE

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Dedication
To my Beloved Parents for their
Support, Compromising efforts and
Devotional Prayers

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ACKNOWLEDGEMENT
All praises belongs to ALLAH Almighty who is the Supreme Authority, Lord of
known and unknown, knows the ultimate relations underlying all sorts of
phenomenon going on in this universe. I’m thankful to ALLAH Almighty who
gave me strength and potential to be able to understand, read, write and helped
me to pursue the best education during internship at SBP.
I also offer my humblest thanks to Holy Prophet (S.A.W.W) who is the forever
torch of guidance and knowledge for humanity as a whole.
After ALLAH and Holy Prophet (S.A.W.W), I thank my Parents who have
supported me in the ups and downs of life by saying, “When the going gets tough,
the tough one gets going”.
I’m thankful to my teacher SIR FIDA HUSSAIN BUKHARI whose tremendous
support, valuable guidance, great help, kind behavior and moral support has made
me able to do internship in SBP.
I’m obliged to Mr. M. MANSHA, Mr. M. ARIF, Mr. NAJAM-UL-HASSAN, Mr.
MAQSOOD and other staff members of BP-BSC who guided and supported me
throughout the project and report. I’m thankful to officials of SBP for the valuable
information provided by them in their respective fields.
Lastly to all my friends who helped me to do internship in State Bank of Pakistan.
Thanks a Lot!

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PREFACE
This project is the compulsion put in by the State Bank of Pakistan to work in
“Development Finance Division” Lahore for the award of Internship in
“UTILIZATION OF PERFORMANCE BASED INCENTIVES IN EXPORT FINANCE
SCHEME”. The SBP-BSC has emerged a successful one in the organization and
the records of the SBP-BSC (bank) are evident to prove the statement.
I went through six weeks internship training in the SBP-BSC (Bank) in order to
perceive the true art and the practical picture of the export refinance scheme
process. The report is according to best of my perception and the knowledge
gained via the books and the courses & practical experience working. For the
convenience of the reader I have tried my level best to make the report
comprehensive and elaborative. The sectioning of the report will pave the way to
read and understand the report easily.
The processes involved in the utilization of performance base incentives in export
finance scheme have been studies thoroughly and the things I have learned will
enhance my capabilities and polish my managerial skills. I’m sure that the
SBP_BSC (Bank) will consider my recommendations related to working of DFD
which I have gone through training.

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TRANSMITTAL MEMORANDUM
To,
Mr. Muhammad Arif,
Assistant Chief Manager, DFD
SBP-BSC (Bank),
Lahore.
Respected Sir,
I’m submitting my report “UTILIZATION OF PERFORMANCE BASED INCENTIVES IN
EXPORT FINANCE SCHEME” to concerned department. I’m thankful to my
supervisor and co-supervisor who furnished me with lucrative knowledge. Their
skills and experience helped me a lot.
Thank you!
From,
Mr. M. Abdul Ghafar
Email: ghafarmalik29@gmail.com
Cell # +92302-4374120

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JUSTIFICATION FOR CHOOSING SBP-BSC
(BANK) FOR INTERNSHIP
Banking sector is important part of a country. It regulates inflow and
outflow of cash in well balanced system. In the world whenever
financial crisis occur, banks initiate. Each country has central body for
banking like as in Pakistan “State Bank of Pakistan”. Central authority
punctuates its entire subordinates for the country as well as public
welfare.
We have selected SBP-BSC for internship to understand and analyze
the banking system. We have golden opportunity for internship here to
understand, what is SBP? How does it work? What are the benefits
being provided to local manufacturer and exporter? SBP-BSC is
currently working with 16 branches and 227 NBP (National Bank of
Pakistan) chest branches. A comparison SBP-BSC (bank) cannot be
made with private banks. Private Banks just has an authority of public
dealing (deposits and advances) while SBP-BSC has current account of
all commercial banks. It has tight grip on the banks and also provide
umbrella in tough time.

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JUSTIFICATION FOR SELECTING
DEVELOPMENT FINANCE DIVISION
Exports is the main source of a country which provides foreign exchange to it
which has importance behind many tasks like issue of currency notes, making
foreign payments against imports, payments of fee by the students pursuing
abroad for higher studies etc.
To enhance exports, SBP started Export Refinance Scheme to boost up the
foreign exchange level. Foreign Exchange means foreign currency e.g. UK
Pound, USA dollar, China Yen, Saudi Arabia Rayal etc. Each country wants to
earn foreign exchange via foreign trade. They are increasing foreign exchange
reserves. Let us have a look on the schedule and graph below:
Countries Forex Reserves 2016 (US$)
USA 121 billion
UK 164 billion
Canada 82.9 billion
China 3305 billion
Russia 393.9 billion
India 365 billion
Bangladesh 30 billion
Saudi Arabia 562 billion
Pakistan 23 billion
Iran 93 billion (2015)
Afghanistan 6.6 billion (2014)
0
50
100
150
200
250
300
350
400
Forex ReservEFS

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But why is it so? It is just for economic development. Countries are trying to
enhance exports. Strong export growth gives a great deal for rapid investment. In
Pakistan, a local businessman who has expertise in his field has ambition to move
in international market.
As this is so important department of SBP, I selected DFD to have thorough
understanding of the working of this department.

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INTERNSHIP EXPERIENCE AND
LEARNINGS
My overall experience of being an internee at SBP-BSC was excellent, full of
information, and knowledge.
Some new things that I learned here are:
 How to work individually and in groups in a relaxed and stressful
environment.
 Patience is very importance in building relationships, loose temperament
and angriness can lose your respect.
 How to behave in an enterprise environment
 The importance of documentation and the way to keep them save.
 How promotional activities and meetings play a vital role in creating
awareness in the general public.
 How to deal with people and how to get information from them.
 How to work in groups, how to lead the teams and how to handle minor
and major disputes.
 How to avoid delays and become dutiful and punctual.

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Table of Contents
1. Evolution of Banking-----------------------------------------------13
1.1. Origin of Banking System----------------------------------------------16
1.2. Evolution of Central Banking------------------------------------------17
1.2.1. Beginnings--------------------------------------------------------18
1.2.2. Transition----------------------------------------------------------18
1.2.3. The Origin of Modern Central Banking Goals---------------20
1.2.4. Financial Stability------------------------------------------------21
1.3. Evolution of Banking in Pakistan--------------------------------------22
1.3.1. Banking Growth during (1948-1970)------------------------- 23
1.3.2. Banking Reforms 1970------------------------------------------26
2. Central Bank & its Functions-------------------------------------28
2.1. Functions of Central bank-----------------------------------------------29
3. About SBP------------------------------------------------------------30
3.1. History---------------------------------------------------------------------31
3.2. Objectives-----------------------------------------------------------------32
3.3. Vision----------------------------------------------------------------------33
3.4. Mission--------------------------------------------------------------------33
3.5. Responsibilities-----------------------------------------------------------33
3.6. Current Governor SBP--------------------------------------------------34
3.7. Past Governors-----------------------------------------------------------35
3.8. Current Deputy Governors---------------------------------------------41
3.9. SBP’s Profile (BODs)---------------------------------------------------41
3.10. Organogram---------------------------------------------------------------45
3.11. Head Office Hierarchy--------------------------------------------------46
3.12. Departments---------------------------------------------------------------47
3.13. Functions------------------------------------------------------------------50
3.14. Birth of Pakistani Currency---------------------------------------------55
3.15. Subsidiaries---------------------------------------------------------------55
3.15.1. NIBAF-------------------------------------------------------------55
4. About SBP-BSC----------------------------------------------------- 59
4.1. Introduction---------------------------------------------------------------60
4.2. Need for Creation--------------------------------------------------------61
4.3. Vision----------------------------------------------------------------------61
4.4. Mission--------------------------------------------------------------------61
4.5. Field Offices--------------------------------------------------------------62
4.6. Major Stakeholders of SBP-BSC--------------------------------------68
4.7. Organogram---------------------------------------------------------------69

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4.8. Divisions------------------------------------------------------------------70
5. Products/Services of SBP-BSC------------------------------------84
5.1. Asset Base Products/Services------------------------------------------84
5.2. Liability Base Products/Services---------------------------------------84
6. Analysis----------------------------------------------------------------84
6.1. Management Analysis---------------------------------------------------84
6.2. Customer Analysis-------------------------------------------------------85
7. Overview of Departments -----------------------------------------86
7.1. Development Finance Division----------------------------------------87
7.2. Export Finance Division------------------------------------------------91
7.3. Issue & Treasury Department------------------------------------------97
7.4. Cash Management Department---------------------------------------108
7.5. Prize Bond Division----------------------------------------------------110
7.6. Banking Division------------------------------------------------------ 115
7.7. Securities Division-----------------------------------------------------119
7.8. Foreign Exchange Operation Department-------------------------- 122
7.9. Foreign Exchange Adjudication Department---------------------- 124
7.10. Audit Division--------------------------------------------------------- 125
8. Working Department-DFD-------------------------------------- 126
8.1. About DFD------------------------------------------------------------- 127
8.2. Vision------------------------------------------------------------------- 127
8.3. Mission------------------------------------------------------------------ 127
8.4. Organogram-DFSD---------------------------------------------------- 128
8.4.1. Organogram of DFD------------------------------------------ 129
8.4.2. Organogram of LTFF------------------------------------------ 130
8.4.3. Organogram of EFS------------------------------------------- 133
8.4.4. Organogram of AFU------------------------------------------- 135
9. About EFS Scheme Part-II---------------------------------------136
9.1. Glossary---------------------------------------------------------------- 137
9.2. List of Acronyms------------------------------------------------------ 139
9.3. Introduction Part-II---------------------------------------------------- 140
9.4. Pre-requisites of Entitlement of Limit------------------------------ 141
9.5. Monitoring of Export Performance--------------------------------- 143
9.6. Markup Rate------------------------------------------------------------144
9.7. Eligibility--------------------------------------------------------------- 145
9.8. Facility for Indirect Exporter-----------------------------------------145
9.9. Overdue Proceeds------------------------------------------------------145
9.10. Credit Risk--------------------------------------------------------------145
9.11. Rollover Facility--------------------------------------------------------146

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9.12. Extension in Period of Borrowing Limit----------------------------146
9.13. Calculation of Borrowing & Performance--------------------------146
9.14. Important Transaction Dates being counted for
Entitlement/Performance purpose------------------------------------150
10. Project:-------------------------------------------------------------151
10.1. Introduction-------------------------------------------------------------152
10.1.1. History-----------------------------------------------------------152
10.1.2. Part-I-------------------------------------------------------------153
10.1.3. Part-II------------------------------------------------------------154
10.1.4. Difference b/w Part-I & Part-II-------------------------------154
10.2. SOPs of EFS Part-II---------------------------------------------------155
10.3. Flow Chart of EFS Part-II--------------------------------------------158
10.4. Difference between EE-1 and EF-1----------------------------------159
10.5. EE-1 Form & EF-1 Form Flow Chart------------------------------- 162
10.6. DE-3 Form-------------------------------------------------------------- 163
10.7. EP-Form----------------------------------------------------------------- 164
10.8. Undertaking form of Exporter---------------------------------------- 165
10.9. Fines Chargeable under Part-II--------------------------------------- 166
10.10.Performance Incentives------------------------------------------------167
10.11.SOPs for Performance based Markup refund-----------------------169
10.12.Need of Incentives------------------------------------------------------173
10.13.Exports of Pakistan-----------------------------------------------------174
10.14. Last two years data regarding availment of Incentives------------
10.15. Comparing potential & actual scale of utilization of incentives--175
10.16. Problem Statement-----------------------------------------------------177
10.17. Suggestions/Recommendations to increase utilization of the
incentives----------------------------------------------------------------178
11.Conclusion-----------------------------------------------------------180
12.Annexures------------------------------------------------------------181
12.1. UT-DE-II------------------------------------------------------------------------------182
12.2. Form “DE-3”-------------------------------------------------------------------------183
12.3. UT-IDE-II-----------------------------------------------------------------------------185
12.4. Form-EB-------------------------------------------------------------------------------187
12.5. Form EE-1----------------------------------------------------------------------------187
12.6. Form EF-1-----------------------------------------------------------------------------189
12.7. Form-EP for Rollover---------------------------------------------------------------190
12.8. Claim Form---------------------------------------------------------------------------191
12.9. Claim Form for Rebate--------------------------------------------------------------192
12.10. Negative List--------------------------------------------------------------------------193
13.References-----------------------------------------------------------198

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Evolution of Banking

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1. Evolution of Banking
Definition of Bank:
“A financial Institution, which deals with money and credit. It accepts
deposits from individuals, firms and companies at a lower rate of
interest and gives at higher rate of interest to those who need them”
“A financial establishment which uses money deposited by customers
for investment, pays it out when required, makes loan at interest,
exchanges currency, etc.”
Banker:
J.W. Gilbert in his principles and practice banking defines a banker as:
“A banker is dealer in capital or more property, a dealer in money. He
is intermediate party between the borrower and the lender. He borrows
of one and lends to another.”
Sir John Paget defines banker in these terms:
“That no persons or body, corporate or otherwise, can be a banker
who does not
 Take Deposits accounts
 Take current accounts
 Issue and pay cheques
 Collect cheques crossed and uncrossed for his customers.”
The American defined the term banker in a very broad sense as under:
“By banking, we mean the business of dealing in credits and by a
‘Bank’ we include every person, firm or company having a place of
business where credits are opened by deposits of collection of money
or currency. Subjects to be paid or remitted on cheques or order, money

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is advances or loaned on stacks, bullion, bonds, bills of exchange,
promissory notes are received for discount or sale”

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1.1. Origin of Banking System:
It is believed that the English word “Bank” derived from the Italian word “Banco”
(long bench), because Jewish bankers sat them while providing currency
exchange and loan services, normally in populous areas like markets or preaching
halls.
“Bank” may also trace its origins to the German word “Banch” meaning “A pile”,
the word Germans used to represent a kind of public debt.
Regardless of how the word originated, banks have been important financial
institutions liking the economies of the world. Historically, banks functioned to
provide deposit, loan, and currency exchange services. With time, these banking
services became increasingly important to a nation’s economic advancement.
There is a firm evidence that around 3900 B.C., Egypt adopted a banking service
utilizing cows as units of exchange. Deposited cows were assigned a value and
exchanged for goods of equal value. Near Babylon, in modern-day Iraq, services
to secure valuables and extend business loans were also emerging. At the Semitic
red monastery of Uruk (Thought to be the derivation of “Iraq”), one of the world’s
oldest cities, the priests leased land to farmers. The Monastery also held a vast
quantity of valuables donated by the faithful. The monastery earned extra income
by lending these items to borrowers and charging rental fees.
Later, they offered pawning services, paying farmers cash for their grain and
cattle. As Uruk prospered, traders began depositing their valuables with the
monasteries. They were issued clay tablets colored with sienna as proof of
deposit; with them, they could withdraw items at monastery branches. In addition
to the monasteries, wealthy people offered banking services.
Babylon’s banking sector was ultimately impacted by its many wars and the
empire’s subsequent decline, but around 400 B.C., the increasingly prosperous
cities of Athens and Rome established their own Banks.
Once more, monasteries were the key players with priests, both male and female,
acting as “Bankers’. They accepted deposits of cash and valuables against loans
which were extended to people affected by disorders or wars. The “bankers” also
provided currency exchange, loans, and bills of exchange equivalent to the
amounts deposited. These bills were debts payable and ere accepted for use in
other cities. Under strict government supervision, banking grew, attracting
investors from the private and public sectors throughout the realm. As the Roman
Empire began to disintegrate, trade and banking declined.

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In the Middle Ages (4th
-14th
centuries), the void created by the collapse of the
Roman Empire led to war and chaos in Europe. Powerful groups with wealth and
vast land holdings built castles and defended them with private armies.
Ironically, these conditions were conductive to the development of trade and
banking. The Crusades required heavy expenditures by regional rules, who sent
knights and soldiers to do battle in the Holy Land, and spent vast sums to arm and
supply them. This precipitated the initiation of lending services, sine cash was
needed to ransom captured soldiers, and to pay delivery costs for seized valuables.
With a growing demand for its services, banking experienced a revival.
Parishioners’ increased their donations of money and valuables to the Church of
Rome, enhancing the wealth of Italy’s private Banks. Renowned institutions like
the Bank of Venice, established in 1157, offered to pay government debts
incurred when they borrowed money from citizens. Eschewing cheques and
promissory notes, the Bank employed a system of recorded transfer lists in the
accounts.
In 1857, it began to take in deposits. Other famed banks of this era- the bank of
Barcelona (founded in 1400), the Bank of Geneva (Founded in 1407) and the
Bank of Amsterdam (Founded in 1609)- expanded rapidly, offering such services
as deposits, transfer of the bank’s inter accounts, and payment upon the account
holders’ request. The extensive services they offered to traders turned these cities
into commercial centers.
1.2. Evolution of Central Banking:
A central bank is the term used to describe the authority responsible for policies
that affect a country’s supply of money and credit. More specifically, a central
bank uses its tools of monetary policy, open market operations, discount window
lending, and changes in reserve requirements – to affect short-term interest rates
and the monetary base (currency held by the public plus bank reserves) and to
achieve important policy goals.
There are three key goals of modern monetary policy. The first and most
important is price stability or stability in the value of money. Today this means
maintaining s sustained low rate of inflation. The second goal is stable real
economy, often interpreted as high employment and high and sustainable
economic growth.
Another way to put it is to say that monetary policy is expected to smooth the
business cycle and offset shocks to the economy. The third goal is financial

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stability. This encompasses and efficient and smoothly running payments system
and the prevention of financial crises.
1.2.1.Beginnings:
The story of central banking goes back to the 17th
century, to the founding of the
first institution recognized as a central bank, the Swedish Riksbank, established
in 1668 as a joint stock bank, it was chartered to lend the government funds and
to act as a clearing house for commerce. A few decades later (1694), the most
famous central bank of the era, the Bank of England, was founded also as a joint
stock company to purchase government debt.
Other central banks were set up later in Europe for similar purposes, though some
were established to deal with monetary disarray. For example, the Banque-de-
France was established by Napleon in 1800 to stabilize the currency after the
hyperinflation of paper money during the French Revolution, as well as to aid in
government finance. Early central banks issued private notes which served as
currency, and they often had a monopoly over such note issue.
While these early central banks helped fund the government’s debt they were also
private entities that engaged in banking activities. Because they held the deposits
of other banks, they came to serve as banks for bankers, facilitating transactions
between banks or providing other banking services. They became the repository
for most banks in the banking system because of their large reserves and extensive
networks of correspondent banks. These factors allowed them to become the
lender of last resort in the face of a financial crisis. In other words, they became
willing to provide emergency cash to their correspondents in times of financial
distress.
1.2.2.Transition: (Change)
The Federal Reserve System belongs to a later wave of central banks, which
emerged at the turn of the twentieth century. These banks were created primarily
to consolidate the various instruments that people were using for currency and to
provide financial stability. Many also were created to manage the gold standard,
to which most counties adhered.
The Gold standard, which prevailed until 1914, meant that each country defined
its currency in terms of a fixed weight of gold. Central banks held large gold
reserves to ensure that their notes could be converted into gold, as was required
by their charters. When their reserves declined because of balance of payments
deficit or adverse domestic circumstances, they would raise their discount rates
(the interest rates at which they would lend money to the other banks). Doing so

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would raise interest rates more generally, which in turn attracted foreign
investment, thereby bringing more gold into the country.
Central Banks of this era also learned to act as lenders of last resort in times of
financial stress- when events like bad harvests, defaults by railroads, or wars
precipitated a scramble for liquidity (in which depositors ran to their banks and
tried to convert their deposits into cash). The lesson began early in the 19th
Century as a consequence of the Bank of England’s routine response to such
panics. At the time, the bank (and other European Central Banks) would often
protect their own gold reserves first, turning away their correspondents in need.
Doing so precipitated major panics in 1825, 1837, 1847 and 1857, led to severe
criticism of the Bank.
In response, the Bank adopted the “responsibility doctrine”, proposed by the
economic writer Walter Bagehot, which required the Bank to subsume its private
interest to the public interest of the banking system as a whole. The Bank began
to follow Bagehot’s rule, which was to lend freely on the basis of any sound
collateral offered, but at a penalty rate (that is, above market rates) to prevent
moral hazard. The bank learned its lesson well. No financial crises occurred in
England for nearly 150 years after 1866. It wasn’t until August 2007 that the
country experienced its next crisis.
The U.S. experience was most interesting. It had two central banks in the early
19th
century, the Bank of the United States (1791-1811) and a 2nd
Bank of the
US (1816-1836). Both were set up on the model of the Bank of England, but
unlike in general, and of central banks in particular, so that in each case, the
charters were not renewed.
There followed an 80-year period characterized by considerable financial
instability. Between 1836 and the onset of the Civil War, a period known as the
Free Banking Era, states allowed virtual free entry into banking with minimal
regulation. Throughout the period, banks failed frequently, and several banking
panics occurred. The payments system was notoriously inefficient, with
thousands of dissimilar-looking state bank notes and counterfeits in circulation.
In response, the govt. created the national banking system during the Civil War.
While the system improved the efficiency of the payments system by providing
a uniform currency based on national bank notes, it still provided no lender of last
resort, and the era was common with severe banking panics.
The crisis of 1907 was the straw that broke the camel’s back. It led to the creation
of the Federal Reserve in 1913, which was given the mandate of providing a
uniform and elastic currency (that is, one which would accommodate the

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seasonal, cyclical, and secular movements in the economy) and to serve as a
lender of last resort.
1.2.3.The Genesis (origin) of Modern Central Banking Goals:
Before 1914, central banks didn’t attach great weight to the goal of maintaining
the domestic economy’s stability. This changed after World War I, when they
began to be concerned about employment, real activity, and the price level. The
shift reflected a change in the political economy of many countries-suffrage was
expanding, labor movements were rising, and restrictions on migration were
being set. In the 1920s, the Fed began focusing on both external stability (which
meant keeping an eye on gold reserves, because the U.S. was still on the gold
standard) and internal stability (which meant keeping an eye on prices, output,
and employment). But as long as the gold standard prevailed, external goals
dominated.
Unfortunately, the Fed’s monetary policy led to serious problems in the 1920s
and 1930s. When it came to managing the nation’s quantity of money, the Fed
followed a principle called the real bills doctrine. The doctrine argued that the
quantity of money needed in the economy would natural be supplied so long as
Reserve Banks lent funds only when banks presented eligible self-liquidating
commercial paper for collateral.
One corollary of the real bills doctrine was that the Fed should not permit bank
lending to finance stock market speculation, which explains why it followed a
tight policy in 1928 to offset the Wall Street boom. Thy policy led to the
beginning of recession in August 1929 and the crash in October. Then, in the face
of a series of banking panics between 1930 and 1933, the Fed failed to act as a
lender of last resort.
As a result, the money supply collapsed, and massive deflation and depression
followed. The Fed erred because the real bills doctrine led it to interpret the
prevailing low short-term nominal interest rates as a sign of monetary ease, and
they believed no banks needed funds because very few member banks came to
the discount window.
After the Great Depression, the Federal Reserve System was reorganized. The
Banking Acts of 1933 and 1935 shifted power definitively from the Reserve
Banks to the board of Governors. In addition, the Fed was made subservient to
the Treasury. The Fed regained its independence from the Treasury in 1951,
whereupon it began following a deliberate countercyclical policy was quite
successful in ameliorating several recessions and in maintaining low inflation. At
the time, the U.S. and other advanced countries were part of the Bretton Woods

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System, under which the U.S. pegged the dollar to gold at $35 per ounce and the
other countries pegged to the dollar. The link to gold may have carried over some
of the credibility of a nominal anchor and helped to keep inflation low.
The picture changed dramatically in the 1960s when the Fed began following a
more activist stabilization policy. In this decade it shifted its priorities from low
inflation toward high employment. Possible reasons include the adoption of
Keynesian idea and the belief in the Philips curve trade-off between inflation and
unemployment. The consequence of the shift in policy was buildup of inflationary
pressures from the late 1960s until the end of the 1970s. The cause of the Great
Inflation are still debated, but the era is renowned as one of the low points in Fed
history. The restraining influence of the nominal anchor disappeared, and for the
next two decades, inflation expectations took off.
The inflation ended with Paul Volcker’s shock therapy from 1979 to 1982, which
involved monetary tightening and the raising of policy interest rates to double
digits. The Volcker shock led to a sharp recession, but it was successful in
breaking the back of high inflation expectations. In the following decades,
inflation declined significantly and has stayed low ever since, since the early
1990s the Fed has followed a policy of implicit inflation targeting, using the
federal funds rate as its policy instrument. In many respects, the policy regime
currently followed repeat the convertibility principle of the gold standard, in the
sense that the public has come to believe in the credibility of the Fed’s
commitment to low inflation.
A key force in the history of central banking has been central bank independence.
The original central banks were private and independent. They depended on the
government to maintain their charters but were otherwise free to choose their own
tools and policies. Their goals were constrained by gold convertibility. In the
twentieth century, most of these central banks were nationalized and completely
lost their independence. Their policies were dispatched by the fiscal authorities.
The Fed regained its independence after 1951, but its independence is not
absolute. It must report to Congress, which ultimately has the power to change
the Federal Reserve Act. Other central banks had to wait until the 1990s to regain
their independence.
1.2.4.Financial Stability
An increasingly important role for central banks is financial stability. The
evolution of this responsibility has been similar across the advances countries. In
the gold standard era, central banks developed a lender of last resort function,
following Bagehot’s rule. But financial systems became unstable between the

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world wars, as widespread banking crises plagued the early 1920s and the 1930s.
The experience of the Fed was the worst. The response to banking crises in
Europe at the time was generally to bailout the troubled banks with public funds.
This approach was later adopted by the United States with the Reconstruction
Finance Corporation, but on a limited scale. After the Great Depression, every
country established a financial safety net, comprising deposit insurance and heavy
regulation that included interest rate ceilings and firewalls between financial and
commercial institutions. As a result, there were no banking crises from the late
1930s until the mid-1970s anywhere in the advanced world.
This changed dramatically in the 1970s. The Great Inflation undermined interest
rate ceilings and inspired financial innovations designed to avoid the ceilings and
other restrictions. These innovations led to deregulation and increased
competition. Banking instability reemerged in the US and abroad, with such
examples of large-scale financial disturbances as the failures of Franklin National
in 1974 and continental Illinois in 1984 and the savings and loan crisis in the
1980s. The reaction to these disturbances was to bail out banks considered too
big to fail, a reaction which likely increased the possibility of moral hazard. Many
of these issues were resolved by the Depository Institutions Deregulation and
Monetary Control Act of 1980 and the Basel I Accords, which emphasized the
holding of bank capital as a way to encourage prudent behavior.
Another problem that has reemerged in modern times is that of asset booms and
busts. Stock market and housing booms are often associated with the business
cycles boom phase, and busts often trigger economic downturns. Orthodox
central bank policy is to not defuse booms before they turn to busts for fear of
triggering a recession but to react after the bust occurs and to supply ample
liquidity to protect the payments and banking systems. This was the policy
followed by Alan Greenspan after the stock market crash of 1987. It was also the
policy followed later in the incipient financial crises of the 1990s and 2000s.
Ideally, the policies should remove the excess liquidity once the threat of crisis
has passed.
1.3. Evolution of Banking in Pakistan
The first phase in evolution of banking in Pakistan sees very hard days for the
whole banking sector. Starting virtually from scratch in 1947, the country today
possesses a full fledge range of banking and financial institutions to cope with
various needs of the economy.
The area now consisting Pakistan was, relatively speaking, fairly well provided
with banking facilities in undivided India, in March 1947 there were 3496 offices

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in Indian scheduled banks out of which as many as 487 were situated in territories
now constituting Pakistan.
The Reserve Bank of India was the central banking authority in India. At the time
of partition it was decided that in the interest of smooth transition it should
continue to function in newly emerging state of Pakistan, until 30th
September,
1948.
In 1947, due to uncertainty and unsuitability the banking sector suffer heavy
losses. This result in a negative effect on banking service in Pakistan. The banks,
which had their registered offices in Pakistan, transferred to India. In an effort to
bring about the collapse of the new state by pushing a deliberate policy of
withdrawals the Indian bank offices closes quickly. Those banks, which stayed,
operated on in name pending the winding up of their business. The number of
schedule banks thus declined from 487 branches before independence to only 195
branches by 30th
June 1948.
1.3.1.Banking growth During (1948-1970)
In this tense situation, a committee was immediately setup to formulate a scheme
of central banking legislation for Pakistan. Many specialist were of the opinion
that in view of the acute shortage of trained staff, any idea of establishing a central
bank was impractical and the best that could be attempted was the setting up of a
currency board until such times as sufficient staff could be organize to operate
a central bank.
The questions as to whether the institution should be only a currency board or a
full-fledged central bank has exercised the mind of the Pakistan govt. since
independence. Though, it was realized that the shortage of trained personal to run
the central bank would present serious difficulty in view of the tangible
advantages that a central bank enjoyed over currency board.
The Government ultimately decided to take the bold step of setting up a full-
fledged central banking authorities. Among other factors, which led to this
decision, there was the fact the banking facilities in the country had been totally
disrupted and there was an urgent need for their rehabilitation, which a central
bank alone could meet. As there was hardly any time to pass an Act, an order was
drafted, known as the State Bank of Pakistan order, which was promulgated by
the government of Pakistan on 12th
May 1948. The state bank declared open on
July 01, 1948 by the father of the Nation.

Page24
One of the first tasks of the state bank was to arrange for the replacement of the
Reserve bank of India notes, which had continued to circulate in Pakistan during
the transitional period, by Pakistan currency.
The first Pakistan notes were issued in October 1948 in the denominations of Rs.
5, 10 & 100.
An equally urgent task, which the new central bank had to address itself, was the
creation of a national banking system. To this end, while extending every help
and encouragement to Habib Bank to expand its organization, the state bank
recommended the setting up of a new banking institution to serve both as an agent
to the state bank recommended the setting up of a new banking institution to serve
both as an agent of the state bank as well as the spearhead (lead) of its credit
policies.
Accordingly the National Bank of Pakistan was setup under an ordinance in
November 1949. It started with six offices in the former East Pakistan. In view of
the special role assigned to the new institution, contrary to traditional practices
the Governor of the state bank was appointed to head its board of Director in
1950. Under the fostering care of the state bank and the support of the
government, the new institution developed rapidly. By using its special powers,
the state bank made liberal advances to the new bank to help it expand credit
facilities in the country. By 1952, the National Bank of India. Shortly, afterwards,
in November 1952, the governor of the state bank ceased to function as the
president of National Bank of Pakistan.
With a new to broadening the institutional framework of the financial system,
the state bank also sponsored the establishment of specialized credit institutions
in the field of agriculture and industry. Banking companies (control) Act was
passed in December 1948. Specifically empowering the state bank to control the
operations of banking companies in Pakistan.
Moreover realizing that the most serious limitation on the expansion of banking
services in Pakistan was the lack of trained personal, the state bank sponsored a
banking training scheme, which was repeated after year and turned out a large
number of bankers.
As the commercial Banking facilities continued to expand, a new Pakistani bank,
the National Commercial Bank was established and registered as a schedule bank.
In the field of industrial finance a new institution known as the industrial credit
and investment cooperation was set up.
The year 1958 marked the completion of the first decade of the working of the
State Bank of Pakistan. When it was established there were only 195 bank offices

Page25
in existence. At the end of June 1958 their number had increased to 307, of which
Pakistani banks accounted for 232 against 25 in mid of 1948. Moreover at the end
of June 1958, Pakistani banks held 60% of the total banks deposits, and were
responsible for 65 of total bank credit.
When the Ayub Govt. took over in 1958, the banking and monetary scene was
significantly affected by Developments such as the liberalization of imports,
transfer of business in food grains to the private sector, and the firming up of
commodity markets. The demand of funds picked up and there was a substantial
expansion of bank credit to the private sector. The pace of expansion in the
institutional framework of the country’s banking system quickened and a new
Pakistani bank namely the United Bank limited was established.
Owning the fine years (1960-65), the credit structure in Pakistan made rapid
progress. The bank extended its network by opening six new offices located at
Chittagong, Peshawar, Quetta, Khulna, Lyallpur and Rawalpindi. The number of
scheduled bank offices rose from 430 at the end of June 1960 to 1591 in June
1965. Several new banks were added to the list of scheduled banks.
Two principal additions were the commerce bank, and the standard bank. The
number of scheduled banks, which stood at 29 in June 1960 rose to 36 by June
1965.
Under the impact of economic growth and dear scope of private enterprises, bank
credit to the private sector rose from Rs. 1458 million to Rs. 5759 million. Thus
the total expansion in bank credit to the private sector during this period amounted
to Rs. 4300 million, which gave an annual expansion of Rs. 860 million compared
to the annual average increase of Rs. 144 million over the preceding 5 years.
Banks deposits increased from Rs. 2493 million to Rs. 6883 over the preceding
five years period ended June 1965 compared to Rs. 231 million in the proceeding
five years.
Time deposits during this period increased from Rs. 946 million to Rs. 3228
million, where demand deposits rose from Rs. 1997 million to Rs. 3655 million.
The increase in time deposits was particularly rapid. The ratio of time deposits to
total deposits in June 1965 stood at 49.6% age as against 32.01% age five years
earlier.
Another salient feature of banking development during this period was that since
the rate of increase in bank deposits lagged behind the rate of expansion in bank
credit, the banked has to depend increasingly on central bank finance. They
borrowing from the state bank rose from Rs. 11 million in June 1960 to Rs. 1688
million in June 1965. Owing keen demand for bank credit, bank’s investments

Page26
could not increase as rapidly as their advances. Their investments totaled to Rs.
1874 million at the end of June 1965 compared to Rs. 1231 million in June 1960.
Investments which were almost equal to their advances in June 1960 were only
about one third of the advances in June 1965.
The 3rd
plane period witnessed a further expansion of banking facilities in the
country the total number of scheduled banks offices increased from 1591 at the
end of June 1965 to 3133 at the close of June 1970. During the same bank credit
to the private sector rose from Rs. 5789 million to Rs. 9492 million.
There was also a substantial growth in the bank deposits, which increased from
Rs. 6883 million June 1965 to Rs. 13147 million at the end of June 1970. A
remarkable change occurred during this period related to the composition of
deposits. Time deposit becomes greater than demand deposits forming about 54%
age of the total deposits. As oppose to what happened in the previous period, bank
were able to finance a much higher level of credit expansion without having to
increase their borrowings from the Central bank.
1.3.2.Banking Reforms 1972:
After the assumption of office by a new government in 1971, may 1972 different
reforms were introduced to make the banks more responsive to the requirements
of economics growth with social justice. The reforms aimed at bringing about a
more purposeful and equitable distribution of bank credit, improving the
soundness and efficiency of the banks, and securing greater social accountability
of the banking system as a whole.
The role of the banking system had been truly spectacular in mobilizing savings
of the community and meeting the credit needs of the economy. But at the same
time, the banks had generally neglected their role in promoting social justice and
had failed to play an effective role in ensuring a wider and more equitable
dispersal of the benefits of economic growth. In particular the inter locking of
ownership with commercial and industrial interests had led to the misuse of bank
resources.
There was heavy concentration of credit in big accounts and in urban area. Credit
facilities for agriculture, small business, newly emerging exports and housing had
remained obviously inadequate while the banks indulged in capital financing in
few selected business sectors and issued guarantees on behalf of favored clients,
term clients, term financing for industry were wholly absent.
Under the banking reforms introduced in May 1972 the state bank of Pakistan
was accorded wider powers. It was authorized to remove directors or managerial

Page27
personnel, if necessary and superseded the board of directors of a banking
company and appoint administrators during the period of such super session. It
was also empowered to nominate directors on the board of every bank.
As regard bank directors, it was provided that anyone defaulting in meeting his
obligations to bank would forfeit his directorship. Moreover, it was laid down
that no person could serve as director of a bank for more than 6 years
continuously. Each bank was required to have a paid up capital of not less than
5% of its deposits to be progressively build up to 10% age over a period of time.
The banks were also required to transfer 10% of their profit their reserves every
years after the reserves became equal to the paid up capital. With a view to
diversity the ownership of the banks, the banks were required to raise new capital
from the market. Unsecured loans to directors, their families or firms and
companies, were totally prohibited.
The bank reforms also brought about the establishment of new institutions to
achieve new objectives.
A national credit consultative was setup under the supervision of the bank with
representation form the government and the private sector. It was assigned the
task of determining of economy’s annual credit needs within the safe limits of
monetary and credit expansion with reference to the annual development plan.
Such a credit plan was to cover the public and private sectors. Alongside the
National credit council and Agricultural Advisory Committee was formed to
allocate agriculture credit for various purposes, to coordinate the operation or the
agriculture credit agencies and to oversee the flow of credit to the designated
targets. A standing committee on exports in general and the new emerging exports
in particular, was also established. With a view to encourage the banks to extend
credit to small borrowers, a credit guarantee scheme was introduced under which
the state bank under took to share any bonfire losses incurred by the commercial
banks in case of small loans of advances to agriculture.
At the same time two financing institutions were established. The people’s
Finance Corporation was designed to provide finance to people of small means
while the National Development Finance Corporation was setup of finance public
sector owned and managed industries and enterprises.

Page28
2. Central Bank & its Functions
Central Bank is National Bank that provides financial and banking services for
its country’s govt. and commercial banking system, as well as implementing the
govt.’s monetary policy and issuing currency.
2.1. Main Functions of Central Banks
Central banks differ from country to country in their structure and organization,
in their policies and techniques. But their functions are very similar. The Central
bank rendEFS the following important functions in almost all countries.

Page29
Functions of Central Bank
Publishes Economic Statistics and other
information
Acts as Custodian of National's Reserves
Acts as Banker to the Government
Issuang of notes and regulating the volume of
currency
Supervises the activities of Financial
Institutions
Acts as the Lender of last Resort
Acts as banker to the banks
Acts as controller of credit
Functions as National Clearing House

Page30
State Bank of Pakistan
(SBP)

Page31
3. About SBP
SBP is the Central bank of Pakistan. It was established in 1947. The current
Governor of SBP is Mr. Ashraf Mahmood Wathra. SBP performs all above
mentioned functions that the central bank of every country has to perform.
3.1. History of SBP
Before independence on 14 August 1947, during British colonial regime the
Reserve Bank of India was the central Bank for both India and Pakistan. On 30
December 1947 the British Government’s commission distributed the Reserve
Bank of India’s Reserves between Pakistan and India- [30% (Rs. 750 Million
Gold) for Pakistan and 70% for India].
The losses incurred in the transition to independence were taken from Pakistan’s
share (a total of 230 million). When Pakistan came into being, the newly
established state has no central bank and a proper banking system was almost
non-existent. Most of the banks had their head offices in India. Out of 3,496
branches of the scheduled banks, only 631 were situated in Pakistan. To complete
the picture of misery, the entire banking structure was dominated by Hindus. With
the announcement of the Partition Plan of June 3, 1947, the Hindu started to
withdraw their deposits from the banks located in Pakistan. As a result, many
banks had to close down their operations.
Since Pakistan had no central bank of its own, it was decided to assign the
monetary operations of the new state to the Reserve Bank of India for a period of
one year (till September 30, 1948). However, it was soon realized that if this
situation continued for too long, the country’s interests would be hurt.
Accordingly, the State Bank of Pakistan Order was issued on May 12, 1948 and
Pakistan (Monetary System and Reserve Bank) Order, 1947 was amended
according to which the Reserve Bank of India was to stop functioning in Pakistan
on June 30, 1948, with the new central bank taking over on the next day.
At the time of its formation, the State Bank of Pakistan neither had any building
for housing its offices nor was there sufficient time for purchase and construction
of new premises. Therefore, Victoria Museum Building at the Ingle Road was
rented from the Karachi Municipal Corporation and swiftly refurbished. The
Bank was inaugurated on July 1, 1948 by Quaid-e-Azam Muhammad Ali Jinnah,
who thus observed on the guiding principles of the newly-created central bank:
“I need hardly dilate on the important role that the State Bank will
have to play in regulating the economic life of our country. The
monetary policy of the bank will have a direct bearing on our trade

Page32
and commerce, both inside Pakistan as well as with the outside world
and it is only to be desired that your policy should encourage
maximum production and a free flow of trade.”
Under the State Bank of Pakistan Order 1948, the State Bank of Pakistan was
charged with the duty to “regulate the issue of bank notes and keeping of reserves
with the view to securing monetary stability in Pakistan and generally to operate
the currency and credit system of the country to its advantage”.
A large section of the state bank’s duties were widened when the State Bank of
Pakistan Act 1956 was introduced. It required the state bank to “regulate the
monetary and credit system of Pakistan and to foster its growth in the best national
interest with a view to securing monetary stability and fuller utilization of the
country’s productive resources”. In February 1994, the State Bank was given full
autonomy, during the financial sector reforms.
On January 21, 1997, this autonomy was further strengthened when the
government issued three Amendment Ordinances (which were approved by the
Parliament in May 1997). Those included were:
 State Bank of Pakistan Act, 1956,
 Banking Companies Ordinance, 1962,
 Banks Nationalization Act, 1974
These changes gave full and exclusive authority to the State Bank to regulate the
banking sector, to conduct and independent monetary policy and to set limit on
government borrowings from the State Bank of Pakistan.
The amendments to the Banks Nationalization Act brought the end of Pakistan
Banking council (an institution established to look after the affairs of NCBs) and
allowed the jobs of the council to be appointed to the Chief Executives, Boards
of the Nationalized Commercial Banks (NCBs) and Development Finance
Institutions (DFIs). The State Bank having a role in their appointment and
removal. The amendments also increased the autonomy and accountability of the
chief executives, the Boards of Directors of banks and DFIs.
3.2. Objectives
As we all know that State Bank of Pakistan is a non-profit organization. Its main
objective is to manage or maintain the supply of foreign exchange in the country.
Increasing and decreasing the supply of money can create inflation or deflation
in the country, so these things should be handled immediately and the state bank
is doing this.

Page33
3.3. Vision
“To transform SBP into a modern and dynamic central bank,
highly professional and efficient, fully equipped to play a
meaningful role, on sustainable basis, in the economic and
social development of Pakistan”
3.4. Mission
“To promote monetary and financial stability and foster a
sound and dynamic financial system, so as to achieve
sustained and equitable economic growth and prosperity in
Pakistan”
3.5. Responsibilities
State Bank of Pakistan (SBP) is a statutory body set up under the State Bank of
Pakistan Act, 1956. As the central bank, the State Bank of Pakistan has a number
of policies, regulatory and fiduciary responsibilities to strengthen the financial
system of the country and provide an enabling environment for the financial
industry that promotes economic growth framework, These responsibilities
include the regulation of the monetary system and domestic credit through an
efficient monetary policy, ensure monetary stability and exchange rate and ensure
financial stability through regulation and supervision of the banking sector in
particular and industry generally effective financial. Over the years, the SBP has
evolved through stages of being an organization of partial ownership of private
banks, nationalized in 1974 and having seen progressively greater autonomy
since 1994. However, with the recent adoption of an Ordinance by the Federal
Cabinet, which provides for amendments in the State Bank Act, 1956 on the
granting of greater autonomy to the institution, the Central Bank of Pakistan has
achieved much greater administrative and functional independence at any stage
since it was established.

Page34
3.5. Governors
Mr. Ashraf Mahmood Wathra
Governor, State Bank of Pakistan
Mr. Ashraf Mahmood Wathra has been appointed as Governor, SBP with effect
from April 29, 2014, for a period of 3 years.
Mr. Wathra was appointed as Acting Governor, SBP on January 31, 2014 on the
resignation of Mr. Yaseen Anwar, ex-Governor, SBP.
Mr. Wathra’s association with the SBP started when he assumed charge of the
office of Deputy Governor (DG), State Bank of Pakistan (SBP) on March 11,
2013. The Federal Government had notified Mr. Wathra’s appointment as DG,
SBP on March 5, 2013 for a period of three years from the date he assumed office.
Mr. Wathra brings 35 years of commercial & investment banking experience to
his new assignment. Prior to joining SBP, he was serving the National Bank of
Pakistan (NBP) as its Senior Executive Vice President & Group Chief, Credit
Management Group, since October, 2012.
Before joining NBP, Mr. Wathra served Habib Bank Limited from April 1999 to
September 2012 in various responsible capacities such as Regional General
Manager (Bangladesh), Executive Vice President & Regional General Manager
(Singapore), Executive Vice President, Group Executive and Risk Manager &
Senior Credit Officer, Asset Remedial Management Group.
He was attached with Faysal Bank Limited from May 1992 to March 1999 in
senior positions such as Executive Vice President & Country Risk Manager,
Executive Vice President & Regional Manager and Senior Vice President &
Chief Manager. From 1978 to 1992, he had been associated with BRR Capital
Modaraba, Emirates Bank International, American Express Bank Ltd. and ANZ
Grind lays Bank. He also served as Director at Habib Finance International, Hong
Kong and Habib Finance, Australia.

Page35
Holding Master’s Degree in Business Administration, Mr. Wathra has attended a
number of seminars, conferences and courses at home and abroad including
Wharton/SMU General Management Program, Operational Risk Management
and Asian Bonds Summit etc.
Mr. Wathra holds extensive experience in restructuring and reorganization of
business units. He has extensive knowledge of investment banking and
commercial banking operations, trade finance products and underlying delivery
systems. Well conversant with Islamic modes of finance, he has extensive
marketing experience of a cross section of corporate, government and aid
agencies including syndication of large facilities for corporate and public sector.
He also has experience in line management, audit & risk review, and credit & risk
management.
3.6. Past Governors
Zahid Hussain
(June 10, 1948 – July 19, 1953)
Mr. Zahid Hussain took over as first
Governor of State Bank of Pakistan.
Mr. Hussain also served as Financial
Advisor to the Chief Commissioner
Delhi and Financial Advisor in the
honor to be Pakistan’s first High
Commissioner to India from August
1947 to April 1948. Born in 1895, he
studied at Lahore & Aligharh. He was
awarded the Iqbal Gold Medal. He
reorganized the Anglo-Arabic
College and schools in Delhi in 1938
and was the first Treasure of the
Delhi University.
Abdul Qadir
(June 20, 1953 – July 19, 1960)
Mr. Abdul Qadir was the 2nd
Governor of SBP. Before partition,
Mr. Qadir held several administrative
& advisory positions in the Govt. of
India. Born in 1903 at Jallender, Mr.
Qadir was educated at Foreman
Christian College, Lahore. In 1950,
he became the 1st
Pakistani to be
appointed Secretary in the Ministry of
Finance, when he succeeded Mr.
Victor Turner.

Page36
S.A. Hansie
(July 20, 1960 – July 19, 1967)
Prior to becoming the 3rd
governor of
SBP, Mr. Shujahat Ali Hasnie served
as under Secretary & then as Deputy
Secretary, Ministry of Finance, Govt.
of India; joint Financial Advisor, War
& Supply and became a permanent
Joint Secretary, Commerce. It was on
his retirement in October 1958 as
Finance Secretary that he was
appointed as Governor SBP. Born in
1905 Mr. Hasnie did his M.Sc (Hons)
from the Punjab University in 1927.
Mahbubur Reschid
(July 07, 1967 – July 01, 1971)
Mr. Mahbubur Raschid, the fourth
Governor of SBP, was also the 1st
career banker to hold the responsible
office of the Governor. He assumed
the charge of Governor SBP on July
07, 1967. Mr. Raschid spent most of
his career with the banking sector
since 1939. He held several
responsible executive positions,
which include Deputy Managing
Director, National Bank of Pakistan
in East Pakistan and founding
Managing Director of the Industrial
Development Bank of Pakistan.
S.U. Durrani
(July 01, 1971 – Dec. 22, 1971)
Mr. Shakirullah Durrani’s career in
banking started agter he joined
Lloyds Bank Limited in 1951, and
worked in its branches in Karachi,
Lahore, Rawalpindi and Decca. Born
in 1928, Mr. Durrani took over as the
5th
Governor of the SBP. He studies
at the prestigious Government
College Lahore; the Indian Military
Ghulam Ishaq Khan
(Dec. 12, 1971 – Nov. 30, 1975)
Mr. ghulam Ishaq Khan took over as
the 6th
Governor of SBP. His prolific
career includes various Government
posts’ some of the major ones being a
member of the Financial Advisory
Committee of the NWFP
Government. Mr. Khan was born on
January 20, 1915 at Ismail Khel,
Bannu (the Then NWFP). He

Page37
Academy, Dhera Dun, & graduated
from the Pakistan Military Academy,
Kakul in 1948.
relinquished the charge of the
Governor on appointment as
Secretary General (Defence) to the
Government of Pakistan on
November 29, 1975.
S. Osman Ali
(Dec. 01, 1975 - July 01, 1978)
S. Osman Ali was the 7th
Governor of
The State Bank of Pakistan. Prior to
his appointment as Governor State
Bank, he held various positions, some
of the prominent one being Federal
Secretary in the Ministries of
Industries, Commerce & Economic
Affairs from 1958 to 1966, Executive
Director of the World Bank in
Washington from 1968 – 1972,
Pakistan’s Ambassador to Belgium,
EEC and Luxemburg from 1966 –
1968. Nr. Ali was also twice
decorated by the Governor of
Pakistan for his distinguished
services. A graduate in Economics,
Mr. Ali entered the Indian Civil
Service in 1934.
A.G.N. Kazi
(July 15, 1978 – July 09, 1986)
Mr. A.G.N. Kazi, prior to joining
SBP, served in various capacities
which include Collector Thatta,
Additional Secretary, Finance
Department, West Pakistan;
Economic Minister for Pakistan at
Washingtonn from (1962-1965),
Chairman WAPDA; Secretary,
Minister of Finance & Secretary
General Finance & Economic Affairs.
Mr. Kazi was appointed Adviser for
Finance & Economic Affairs to the
Chief Martial Law Administrator on
Jan. 14th
, 1978. Mr. Kazi relinquished
office as Governor of SBP on his
appointment as Deputy Chairman of
the planning Commission on July 09,
1986.

Page38
V.A Jafarey
(July 10, 1986 – August 16, 1988)
Mr. Jafarey joined the Govt. Services
on August 20th
, 1948. His illustrious
career includes several importan
posts, including Secretary, Finance
Department, West Pakistan;
Chairman Plannning and
Development Board, West Pakistan;
Secretary, Minister of Commerce;
Secretary, Ministery of Industries,
Fuel, Power & Natureal Resources;
Ambassador of Pakistan to Belgium
and Luxembourg. Secretary General,
planning and Development Division
& Deputy Chairman, Planning
Commison.
I.A Hanfi
(August 17, 1988 – Nov. 02, 1989 &
Sept. 01, 1990 – June 30, 1993)
Mr. Imtiaz Alam Hanfi became the 1st
Central Bank officer to be appointed
as SBP Governor. His association
with the Central Bank dates back to
1952, when he joined as an officer
class – I, throug an open competitive
examinaiton in which he stood first.
He went on to become the Director in
1970, and by 1976 was promoted to
executive Director. He served for four
years as the Deputy Governor of SBP,
before his appointment as Governor,
Born in January 1929, Mr. Hanfi did
MastEFS in 1952 in Economics from
Karachi University.
Kassim Parekh
(Sept. 09, 1989 – Aug 30, 1990)
Mr. Kassim Parekh was chairman of
the Pakistan Banking Council when
he was asked to act as Governor SBP
on Sept. 05, 1989, during the leave of
Mr. I.A. Hanfi. After Mr. Hanfi’s
resignation as Governor, Mr. Parekh
was appointed SBP Governor on
March 13th
1990 Being a banker he
had 40 years’ experience of banking,
He was President of Habib Bank
Limited, & in December 1981,
Chairman of Banking Council, before
his appointment as Governor SBP.
Mr. Parekh was born on January 31st
,
1931.
Dr. M. Yaqub
(July 25, 1993 – Nov. 05, 1999)
An economists by profession, Dr.
Muhammad Yaqub held several
important positions in the IMF. After
resignation from the IMF in 1992, he
joined the Govt. of Pakistan as special
Secretary/Principal Economic
Advisor in the Ministry of Finance.
Dr. Yaqub resigned as Governor SBP
on Nov. 5th
1999, on his appointment
as member of National Security
Council, born on May 10, 1937, Dr.
Yaqub did his Ph.D in Economics
from Princeton University.

Page39
Dr. Ishrat Husain
(Dec. 02, 1999 – Dec. 01, 2005)
As 13th
Governor of SBP, Dr. Ishrat
Hussain served two terms in the
office. Before his appointment in
SBP, he served as Director Central
Asian Republic; Director, Poverty
and Social Policy Department;
Chairperson, Public Sector Group;
Chief Economist, East Asia and
Pacific Region; Chief of the Debt and
Finance Division and Resident
representative, Nigeria, for World
Bank. Born on June 17, 1941, Dr.
Ishrat got his Master’s degree in
Development Economics from
Williams College & Doctorate in
Economics from Boston University.
Dr. Shamshad Akhtar
(Jan. 02, 2006 – Jan. 01, 2009)
Dr. Shamshad Akhtar is the 1st
women Governor of SBP. Her
illustrious career includes her
appointment as the DG of the Asian
Development Bank (ADB), South
East Asia. She also served as the
Deputy Director General of the
Department and as Director,
Governance, Finance and Trade
Division, East and Central Asia
Department of ADB. Born in
Hyderabad, Dr. Akhtar got early
education at Karachi & Islamabad,
M.A Development Economics,
University of Sussex, 1977 & Ph.D
Economics, from U.K.’s Paisley
College of Technology.
Syed Salim Raza
(Jan. 02, 2009 – June 02, 2010)
Syed Salim Raza took over as 15th
Governor of the SBP on January 02,
Shahid Hafeez Kardar
(Sept. 09, 2010 – July 18, 2011)
Mr. Shahid Hafiz Kardar, the 16th
Governor of SBP assumed his charge

Page40
2009. Prior to his assumption of the
office of SBP Governor, Mr. Raza
was the Chief Executive Officer of
Pakistan Business Council (SBC)
since February 2006. Mr. Raza had a
36 years of international banking
experience. He had been with the
Citibank, N.A in various positions
that included Country and Regional
Management across the Middle East,
Africa and the UK, Central and
Eastern Europe.
on 9th
Sept. 2010. Mr. Kardar had also
served as Minister for Finance,
planning & Development, excise and
taxation and Industries & Minerals
Development, Govt. of Punjab from
Nov. 1999 to January 2001. Mr.
Kardar holds MA (with a major in
Economics) from the University of
Oxford and a Chartered Accountancy
from the Institute of Chartered
Accountants, England and Wales.
Yaseen Anwar
(Oct. 02, 2011 – Jan. 31, 2014)
Mr. Yaseen Anwar assumed the
charge of 17th
Governor of SBP on
October 20, 2011. Mr. Anwar served
the State Bank as its Deputy
Governor since 29th
March 2007, and
managed all the four clusters of the
central bank. Mr. Anwar has also
served on the Boards of various
prestigious organizations. He
interacted with the IMF under the
Standby Arrangement with Pakistan.
He has also served on the Asian
Clearing Union (ACU) Board.
Ashraf Mahmood Wathra
(April 29, 2014 – till now)
Mr. Ashraf Mahmood Wathra is the
current Governor of State Bank of
Pakistan. He assumed charge of
Governor on April 29, 2014, for a
period of 3 years. Mr. Wathra’s
association with the SBP started when
he assumed charge of the office of
Deputy Governor, SBP on March 11,
2013. Mr. Wathra brings 35 years of
commercial & investment banking
experience to his new assignment.
Prior to Joining SBP, he was serving
the National Bank of Pakistan, as its
Senior Executive Vice President &
Group Chief, Credit Management
Group, Since October, 2012.

Page41
3.7. Current Deputy Governors
Present Deputy Governors of the State Bank of Pakistan
Deputy Governors
Mr. Saeed Ahmad
Deputy Governor
Mr. Riaz Riazuddin
Deputy Governor
3.8. SBP’s Profit (BODs)
The SBP Board consists of ten members: the Governor (who is Chairman),
Secretary, Finance Division, Government of Pakistan, and eight Directors,
including at least one from each province, who shall be eminent professionals
from the fields of economics, finance, banking and accountancy, to be
appointed by the Federal Government. The Directors are appointed for terms of
up to three years.
The current members of the Board of SBP:
Chairman: Mr. Ashraf Mahmood
Wathra
Governor

Page42
Dr. Waqar Masood Khan
Secretary, Finance Division,
Government of Pakistan
Appointed on April 16, 2013
Dr. Tariq Hassan
Appointed on March 22, 2016
Present term ends on March 21, 2019
Hafiz Mohammad Yousaf
Mr. Zubyr Soomro

Page43
Khawaja Iqbal Hassan
Mr. Zafar Masud
Mr. Ardeshir Khursheed Marker
Mr. Mohammad Riaz

Page44
Mr. Sarmad Amin
Sahar Z. Babar
Corporate Secretary

Page45
3.9. Organogram

Page46
3.10. Head Office Hierarchy
Governor (SBP)
Deputy Governors
(SBP)
Managing
Directors (SBP-
BSC)
Department
Heads (SBP-BSC)
Chief Manager
(SBP-BSC)
Junior Joint
Directors (Division
Head SBP BSC)
Assistant Directors
(Unit Head SBP-
BSC)

Page47
3.11.Departments of SBP
The organization of the Bank has been divided into sixteen departments. A brief
description of these departments is given below;
3.11.1. Accounts Department
Provides effective & efficient accounting services & information for planning,
control and decision-making regarding annual budget and balance sheet of the
Bank. It also undertakes sale and purchase of foreign currencies and acts as
custodian of Pakistan’s reserves of approved foreign exchange.
3.11.2. Audit Department
It provides independent appraisal of all the activities of SBP aiming to add
value, improve operational efficiency, risk management & internal control
systems.
3.11.3. Agricultural Credit Department
ACT coordinates the operations of the Bank in connection with agriculture
credit and its relations with the provincial co-operative banks and any other
organizations engaged in the business of agricultural credit.
3.11.4. Banking Inspection Department
BID achieves the regulatory goals of State Bank of Pakistan, i.e. ensuring the
safety and soundness of the financial system and safeguards the interests of
the depositors. In order to assess a financial institutions, BID conducts regular
on-site inspection of all scheduled banks inclusive of the foreign banks &
DFIs.
3.11.5. Banking Policy Department
BPD reviews and formulates proactive policy framework for banks/NBFIs
concerning diligent licensing, proposals for mergEFS/acquisition,
privatization matters, management of the banks and conducting special studies
for improvement in the banking sector with a view to safe guard the
depositor’s interest.
3.11.6. Banking Supervision Department
Banking Supervision Department ensures enforcement of regulatory and
supervisory policies, monitors risk profiles, and evaluates operating
performance of individual banks and DFIs as also of the overall banking
system. It also ensures that banks and DFIs are adequately capitalized and

Page48
have policies and systems in place to access various risks. Furthermore, the
department is also responsible for regulation and supervision of Micro Finance
Banks to ensure their soundness and stability. BSD also provides online
collection & dissemination of credit related information to financial
institutions.
3.11.7. Corporate & Media Affairs Department
This department is entrusted to arrange Central Board meetings. It takes care
of all the affairs related with Board of the Bank, acts as spokesman of the Bank
for media and other external Stakeholders, and manages publications of the
State Bank of Pakistan.
3.11.8. Economic Policy Department
Prepares Monetary survey, credit plans, working papers for National Credit
Consultative Council (NCCC) and M& FCB meetings, keeps constant watch
and analyses developments in the financial markets and matters relating to
Pakistan’s Relationship with IFIs.
3.11.9. Exchange & Debt Management Department
Its function is effective and efficient execution of monetary and exchange rate
policies though money market and foreign exchange operations. It also
performs domestic debt management functions.
3.11.10. Exchange Policy Department
Its functions include formulation and regulation of policies relating to foreign
exchange matters.
3.11.11. Human Resource Department
Its objectives is excellence at acquiring, developing and retaining the right
relent for SBP by continuous innovation & improvement of the HR policies
& procedures, providing effective facilitation and advisory services to line
departments and efficient and timely delivery of HR services.
3.11.12. Information System Department
It is responsible for oversight and management of the technology operations,
development and implementation, including all corporate systems, LANs,
WANs, databases, websites, system administration and desktop support for
the SBP.

Page49
3.11.13. Islamic Banking Department
IBD has been set up recently with the objective of promoting and regulating
Islamic banking in the country. Its vision is “Make Islamic Banking the
banking of first choice for the providers and users of financial services”. All
matters relating to Islamic Banking in the country are taken care of by this
department.
3.11.14. Payment System Department
It is set up recently to implement Real Time Gross Settlement (RTGS) project,
and to avEFSe the existing payment and settlement system in place and
develop a strategy with the banking industry for improvement in the banking
system.
3.11.15. Research Department
Makes objective analyses of economic developments; explore inter-linkages
between macroeconomic policies; and examine their relationships with overall
economic growth, with a view to initiating informed public debates on
national issues, and guiding formulation of sound economic policies. It also
prepares annual and quarterly reports on the status of economy.
3.11.16. Statistics Department
The department is responsible for collection, compilation, dissemination and
publication of statistics on economic, financial and monetary aspects most
pertinent to the central banking.

Page50
3.12. Functions - (Graphical Representation)
Functions
of SBP
Secondary
Functions
Other Functions
Advisior to
Government
Maintaining close
relationships with
international
Financial Institutions
Agency Functions
Management of
Public Debt
Management of
Foreign Exchange
Primary
Functions
Issue of Notes
Regulation &
Supervision of
Financial System
Banker's Bank
Lender of the Last
Resort
Banker to
Government
Development &
Implementation of
Monetary Policy

Page51
The Functions of State Bank of Pakistan are governed by the State Bank of
Pakistan Act. 1956. State Bank of Pakistan will continue performing its four
basic functions.
 Framing and operation of monetary policy
 Regulations and supervision of Banks and financial institutions
 Foreign exchange management
 Settlement of payments and accounts
The Basic functions performed by State Bank of Pakistan are now discussed in
brief as under:
Primary Functions:
3.12.1. Issue of Notes
The state Bank of Pakistan has the sole right to issue notes except subsidiary coins
which are issued by the Govt. 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 Minimum Reserve System. The size of notes issue reflects
the public demand for money. The amount 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.
3.12.2. Regulation & Supervision of Financial System
The SBP has full powEFS to supervise and control the banking system in the
country. The regulatory powEFS 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, inspection
of banks etc.
3.12.3. Banker's Bank
State Bank of Pakistan perform function of banker’s to Banks. All commercial
banks open and maintain their accounts with state bank of Pakistan. They are also
required to deposit 5% of their time and demand liabilities with SBP as cash
reserves and 20% as investment in govt. securities called. Statutory Liquidity
Ratio. Such banks deposit and withdraw the money from SBP according to its
requirements as individuals maintain their accounts.

Page52
3.12.4. Lender of the Last Resort
The SBP is the lender of last resort for the commercial banks. If, at any time, the
banks are short of cash reserves, the State Bank of Pakistan comes to their rescue.
It provides cash to commercial banks by rediscounting bills of exchange and
treasury bills. The SBP thus helps and maintain liquidity and solvency of the
commercial banks.
3.12.5. Banker to Government
State Bank of Pakistan also act as the banker to the government. SBP 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 State bank of Pakistan on its
behalf. SBP usually pays to the employees of;
 Pakistan Railway
 Military/Army
 Police
 Air force
 Navy
 Provincial Govt.
 Federal Govt. etc.
3.12.6. 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 in order to achieve specific
economic objectives such as price stability, reduce unemployment, stability of
money supply in circulation, etc. The main instruments of monetary policy
are;
i. Open market operations
ii. Change in Reserve Requirement
iii. Change the discount Rate.
i. Open market operations: Open market operations 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.

Page53
ii. Change in Reserve Requirement: The SBP also controls the money
supply in the country by changing cash reserve requirements of the
commercial banks. An increase in the cash reserve ratio reduces the
excess reserves of the bank and curtails the powEFS of the banks to
advance loans. The decrease in the cash reserve ration increases the cash
reserves of the commercial banks which increase 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
money supply in the country. A decrease in the bank rate works in the
opposite direction.
Secondary Functions
3.12.7. Management of Public Debt
State Bank of Pakistan also performs the services of managing public debt on
behalf of the Govt./National Savings. There are two PDOs in Pakistan which
are authorized to receive debt from the public. These debts may be collected
against prize bonds, National Saving Certificates like Special Saving
Certificates, or Defense Saving Certificates. SBP manages the proceeds
against such instruments.
3.12.8. Management of Foreign Exchange
The SBP acts as custodian of foreign exchange reserves manages exchange
control and external value of the rupee and acts as the agent of the government
in respect of Pakistan’s membership of IMF. An important aspect of foreign
exchange management is that all foreign exchange transactions are made at
the official rate of exchange. It also maintains the exchange value of the rupee
in terms of other major currencies of the world.
3.12.9. Advisor to Govt.
The state bank of Pakistan also acts as advisor to govt. in full financial matters.
Since SBP is directly involved in the monetary and foreign exchange markets,
it, therefore, tenders advice on all economic matters. It also provides advice to
commercial banks and other financial institutions and to commerce and
industry in general.

Page54
3.12.10. Maintaining close relationships with international
Financial Institutions
State Bank of Pakistan is the central bank so it is dutiful to maintain the
relationships with other financial institutions in the world like IMF, World
Bank etc. All types of debt installments are received by State Bank of Pakistan
on behalf of the Govt.
3.12.11. SBP as Clearing House
The State Bank of Pakistan acts as clearing house for the commercial banks.
A clearing house 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.
3.12.12. SBP and Economic Growth
SBP is playing a significant role in facilitating and fostering economic
development and growth of banking system and other financial institutions in
the country. The main development promotional activities of the Bank are as
follows;
The development of the capital market in the country owes a great deal to the
efforts made by the SBP.
Under the SBP’s Export Finance Scheme, the commercial banks provide
finance to the exporters at the concessional rate.
The State bank of Pakistan helped in the establishment of specialized credit
institutions for meeting the medium and long term credit needs of the various
sectors of the economy.
These institutions include IDBP, NIT, EPE (Equity Participation Fund),
HBFC, ICP (Investment Corporation of Pakistan), Banker’s Equity Limited,
Pakistan Industrial Credit and Investment Corporation (PICIC), Small
Business, Finance Corporation etc.
The functions which the State Bank of Pakistan had been performing and
which involved public dealings have been transferred to the State Bank of
Pakistan Banking Services Corporation. The new corporation has started
functioning from January 02, 2002 as a subsidiary organization of State Bank
of Pakistan.
-------------------------------------------------------------------------------------------

Page55
3.13.Birth of Pakistani Currency
After independence of Pakistan, the notes of Reserve Bank of India were used
with the seal of Govt. of Pakistan having portrait of King George VI. Then, these
notes were demonetized from 15th
January 1952.
Under Section 24 (1) of SBP Act 1956, the SBP has the sole right to issue
banknotes made payable to bearer on demand in Pakistan.
Under Section 26 (1) of SBP Act 1956, the issue of banknotes is conducted by
the SBP is an issue Department which is separate and kept wholly distinct from
the Banking Department and the assets of the issue Department is not to be subject
to liability other than the liabilities of the Issue Department.
3.14. Subsidiaries of SBP
There are two subsidiaries of SBP.
 National Institute of Banking and Finance (NIFAB)
 State Bank of Pakistan- Banking Services Corporation (SBP-BSC)
3.14.1. NIFAB
The National Institute of Business and Finance (NIFAB) is the subsidiary of SBP
that was set up on 8th
March 1993 as a Private ltd. Company by Guarantee and

Page56
was sponsored by the former Pakistan Banking Council (PBC) in collaboration
with NBP, HBL, UBL, MCB, and ABL. The core purpose was to encourage the
study of theory and practice of banking and all allied subjects.
For this purpose NIFAB is meant to provide training facilities, organize events,
adopt means and take all such other measures that would be conductive for the
achievement of this objective. Islamabad is being central and away from the head
offices of banks was selected for this purpose to provide training to senior bank
staff from all over the country.
Initially NIFAB was catering to the limited needs of SBP mostly at entry level
whereas only foundation level courses for SBP staff were delivered under Skills
Up-gradation Program. Besides SBP training programs, two regular annual
international training programs in Central and Commercial Banking were being
offered under Pakistan Technical Assistance Program (PTAP). Keeping in view
its role as the training arm of SBP. NIFAB after becoming a subsidiary of SBP
made renewed initiatives and endeavors to strengthen training by broadening as
well as diversifying its training programs.
Initially, the major focus was to meet growing training needs of SBP. However,
with the passage of time NIFAB developed the capacity to extend its training to
other financial institutions including SBP-BSC.
Courses at NIFAB
Training Methodology:
The methodology adopted by the NIBAF and Training Department is a mix of
instructional and group process of learning. Use of overhead
projector/multimedia in the lecture/presentations coupled with real life
simulations ensures high retention and easy grasp of the training programs by the
participants.
Modular Programs:
Extensive and broad based modular programs have been designed in the areas of
Applied Accounting, Commercial Banking, Economic and monetary
management, Foreign Exchange and liability management and Banking
Supervision. The programs are held at NIBAF as well as Karachi to provide
maximum opportunity of learning in the core areas of central banking.
Design and Development of Training Programs:
The Design and Development of training material of standardized nature is the
area where the training management team at NIBAF and Islamabad is constantly

Page57
involved. The contents of training programs, their coverage and level, sequencing
and progression are carefully considered and charted out. At present standardized
training programs for SBOT and Joint Directors have designed and developed
with the help of core staff. These are well appreciated by the participants and
leading institutions in the country. The NIBAF and Training Department both are
aiming to develop their own training material. So far the institute has developed
training handbooks on Banking Supervision, Debt Management, Pakistan
Economy, Accounting, Commercial Banking, Auditing, Money Market
operations, and other areas of Central Banking.
The refinement and adjustment of training material is also another area where our
training managers are continuously engaged. Areas have been assigned to all
training managers to refine, review and update the economic and relevant data /
material and provide the updated version to participants with all possible
improvements and changes /adjustments.
Foreign Training:
Foreign Training in SBP is fairly limited involving occasional participation of
SBP staff on overseas training program as and when the invitations come.
Recently training in Banking Supervision has been arranged under the aegis of
World Bank through Arthur Andersen. SBP is also exploring into possibility of
training in financial market operations with IMF, World Bank, training
arrangements with Bank Negara Malaysia.
A Foreign Training Selection Committee has been constituted under the
chairmanship of DG-I and comprises ED (Training), ED (HRD), Director
General NIBAF, ED (concerned of said training course), and subject specialist.
The Committee hold its regular meeting for selection of and short list of
candidates nominated for the Foreign Training.
Functional and Organizational Set Up
The functional and organizational set up of NIBAF has undergone a quantum
change in order to utilize the existing facilities of NIBAF at optimum level.
Director General NIBAF is the overall in charge of the Academic Side of the
Institute .He is assisted by two Directors one is looking after Academic and the
other Logistics side.
The institute now has it own in house capacity to organize the design,
development and review of relevant training programs for both domestic and
foreign institutions in the field of banking and finance. The institute has
conducted a number of training programs, which are

Page58
 State Bank Officers Training (SBOT) (For new inductees at OG II level)
 Joint Directors Training Program
 Research Officers Training Program
 International Courses on Central and Commercial banking

Page59
State Bank of Pakistan -
Banking Services Corporation
(SBP-BSC)

Page60
4. About SBP-BSC
SBP-BSC is another subsidiary of State Bank of Pakistan. BSC stands for
“Banking Services Corporation”. The State Bank of Pakistan- Banking Services
Corporation (SBP-BSC) was established on January 02, 2002 as a wholly owned
subsidiary of State Bank of Pakistan, under the SBP banking Services
Corporation Ordinance 2001.
As an operational arm of the Central bank, SBP-BSC is engages in managing
currency and foreign exchange operations, providing banking services to the
government, financial institutions and general public; conducting development
finance activities; implementing export refinance schemes; performing agency
functions like sale/purchase of prize bonds, prize money draws, national saving
schemes or any other functions assigned by SBP.
4.1. Introduction
Banking Services Corporation (BSC) – set up in January 2002, is the subsidiary
of the State Bank of Pakistan and is entrusted with the task of currency
management and operational and administrative oversight of foreign exchange
departments, export and other finance, management of Government accounts and
operational work related to Government certificates. With the changing
environment of banking sector, BSC has undergone significant change. On one
hand BSC has had to relinquish certain functions, it performed at the time when
both interest and credit and foreign exchange was rigorously regulated. On the
other hand, it has to reposition itself to the deregulated environment (while
continuing to perform some old functions such as related to Export Finance
Scheme) and be equipped to deal with a transformed Central Bank and banking
system. The challenges posed by these changing requirements have been
phenomenal but BSC has been steadily shifting its goals and objectives to align
it with the new demands. Going forward, SBP is now working closely with BSC
to develop a strategy for its further transformation to assign a more relevant
Mission to it in line with the withdrawal of some of its old functions, consolidate
the organization, fully automate its services and introduce a new culture of change
management along with better enforcement of the performance management
systems. Developing adequate capacity and managerial skills along with better
internal controls will be critical to achieve the anticipated transformation.
Key Functional & Operational Areas
1. Currency Management
2. Foreign Exchange Operations and Adjudication
3. Export Finance Scheme

Page61
4. Payment and Settlement Systems
5. Banking Services to the Government
4.2. Need for Creation:
Prior to the establishment of BSC, All policies and operational functions were
performed by SBP.
SBP-BSC was the need for separation of voluminous operational functions to
allow SBP to concentrate on core central banking functions.
4.3. Vision
“To develop SBPBSC 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”.
4.4. Mission
“To provide excellent banking and financial services to Stakeholders besides
ensuring implementation of SBP policies in order to command their trust and
respect”

Page62
4.5. Field Offices
Karachi Office
North Nazma Bad
Office
Hyderabad Office
Sukkar Office
Quetta Office
Peshawar Office
Dera Ismail Khan
Office
Muzafarabad Office
Sialkot Office
Faisalabad Office
Gujranwala Office
Lahore Office
Islamabad Office
Rawalpindi Office
Multan Office
Bahawalpur Office

State Bank of Pakistan, BSC Internship Report

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