STATE BANK OF PAKISTAN

1. RESEARCH PROJECT NAME: STATE BANK OF PAKISTAN
Name: Muhammad Asad Siddiqui
Class I.D No: 59523
Subject: Micro Economics
Teacher Name: Sir Salman Ahmed
Class: MBA (eve 2015)
Name: Muhammad Asad Siddiqui
Class I.D No: 59523
Subject: Micro Economics
Teacher Name: Sir Salman Ahmed
Class: MBA (eve 2015)

2. INTRODUCTION
The State Bank of Pakistan is the central bank of Pakistan. Before independence
the reserve bank of India is now the State Bank of Pakistan. The State Bank of
Pakistan Act 1956, with subsequent amendments, forms the basis of its
operations today. The headquarters are located in the financial capital of Pakistan,
Karachi with its second headquarters in the capital, Islamabad. The present
governor of State Bank is Ashraf Mahmood Wathra. The principal officer of SBP is
the Governor of Pakistan.

3. CENTRAL BOARD OF DIRECTORS
The Central Board consists of nine members, the Governor (who is
Chairman), the Secretary, Finance Division, Government of Pakistan and eight
Directors, including one Director from each Province, to be nominated by the
Federal Government. The Directors are appointed for terms of up to three
years.
Chairman: ( Governor SBP)
Dr. Waqar Masood Khan (Secretary Finance)
Mirza Qamar Beg
Khawaja Iqbal Hassan
Mr. Iskander Mohammed Khan
Mr. Shahid Ahmed Khan
Mr. Mehmood Mandviwalla
Mr. M. Nawaz Tiwana
Mr. Muhammad Hidayatullah
Mr. Zafar Masud

4. HISTORY
Before independence on Pakistan, the Reserve Bank of India was the central bank
for both India and Pakistan. On 30 December 1948 the British Government’s
commission distributed the Reserve Bank of India’s reserves between Pakistan and
India 30 percent (750 M gold) for Pakistan and 70 percent for India. The losses
incurred in the transition to independence, small amount taken from Pakistan’s
share (a total of 230 million). In May, 1948 Muhammad Ali Jinnah (Founder of
Pakistan) took steps to establish the State Bank of Pakistan immediately.

5. MISSION AND VISION STATEMENT
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.
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.
Mission and vision of state bank of Pakistan is about to promote policies and
financial system to stabilize the economic growth and to transform state bank of
Pakistan into a modernize and dynamical central bank that would be highly
equipped with new technology, role and booster in the economy and social
development.

6. FUNCTIONS

7. FUNCTIONS

8. PROMOTIONAL FUNCTIONS
The non-traditional or promotional functions, performed by the State Bank
include development of financial framework, institutionalization of savings and
investment, provision of training facilities to bankers, and provision of credit to
priority sectors. The State Bank also has been playing an active part in the process
of islamization of the banking system.

9. Central Bank of Pakistan is also managing the exchange rate of rupee and suitable
position and protect from undue fluctuation. State Bank Pakistan is also focuses
on capital market and also provides assistance to others for the process of
economic growth and development of the country.
The central bank also deals with supervisor of banking sector in Pakistan, micro
financing, minimum capital reserves for banks, small & medium enterprises, risk
management, advisor to government, promotions & guidelines for agriculture
sector, methods of corporate governance, remittance facility, foreign currency
management, Islamic banking and many other functions.
MORE ON THE CENTRAL BANK

10. ISLAMISATION OF THE BANKING SYSTEM
The State Bank are also involved in the process of Islamisation of the economy in
general and the banking system. While inaugurating the State Bank of Pakistan,
the Father of the Nation, Quaid-e-Azam Muhammad Ali Jinnah, and later on the
first Governor of the Bank, late Zahid Hussain, gave a direction to make efforts to
build the economic and financial system of the country on the lines dictated by
Islam. A unit was created in the Research Department of the Bank in late 1950s
to undertake research work on economic system of Islam. Considerable amount
of research work was undertaken in Islamic Economics Division (I.E.D) of the
Bank during 1960s and 1970s. This particularly included the nature and
connotation of ‘Riba’, the Shari’e position of present day interest based financial
system, various alternatives to interest and the fiscal system of Islam. Similarly in
2001 an Islamic Banking Division was established in Banking Policy Department
to deal with the regulatory and supervisory issues in Islamic Banking. To meet
the challenges of developing a dynamic, responsive and viable Islamic banking
system, a new Islamic Banking Department has been established in the Bank in
September, 2003 through the merger of Islamic Economic Division and Islamic
Banking Division.

11. MONETARY POLICY
The Monetary and Credit Policy is the policy statement, traditionally announced
twice a year, through which the State Bank of Pakistan seeks to ensure price
stability for the economy. These factors include - money supply, interest rates and
the inflation. In banking and economic terms money supply is referred to as M3 -
which indicates the level (stock) of legal currency in the economy.
Objectives of the Monetary Policy
The objectives are to maintain price stability and ensure adequate flow of credit
to the productive sectors of the economy. Stability for the national currency
(after looking at prevailing economic conditions), growth in employment and
income are also looked into. The monetary policy affects the real sector through
long and variable periods while the financial markets are also impacted through
short-term implications.

12. INSTRUMENTS OF MONETARY POLICY
Bank Rate of Interest
Cash Reserve Ratio
Statutory Liquidity Ratio
Open market Operations
Margin Requirements
Deficit Financing
Issue of New Currency
Credit Control

13. FISCAL POLICY
It refers to the Revenue and Expenditure policy of the Govt. which is generally
used to cure recession and maintain economic stability in the country.
Instruments of Fiscal Policy
Reduction of Govt. Expenditure
Increase in Taxation
Imposition of new Taxes
Wage Control
Rationing
Public Debt
Increase in savings
Maintaining Surplus Budget

14. How is the Monetary Policy different from the Fiscal Policy
The Monetary Policy regulates the supply of money and the cost and availability of
credit in the economy. It deals with both the lending and borrowing rates of interest
for commercial banks.
The Monetary Policy aims to maintain price stability, full employment and economic
growth.
The Monetary Policy is different from Fiscal Policy as the former brings about a
change in the economy by changing money supply and interest rate, whereas fiscal
policy is a broader tool with the government.
The Fiscal Policy can be used to overcome recession and control inflation. It may be
defined as a deliberate change in government revenue and expenditure to influence
the level of national output and prices.

15. DEPARTMENTS
Accounts Department
It provides effective & efficient accounting services & information for planning,
control and decision-making regarding annual budget and balance sheet of the
Bank.
Agricultural Credit Department (ACD)
It coordinates the operations of the Bank in connection with agricultural credit and
its relations with the provincial co-operative banks and any other organizations
engaged in the business of agricultural credit.
Banking Inspection Department (BID)
It 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. It conducts regular on-site inspection of all scheduled banks inclusive of
the foreign banks.

16. DEPARTMENTS
Banking Policy Department
It reviews and formulates proactive policy framework for Banks/ NBFIs concerning
diligent licensing, proposals for mergers/acquisition, privatization matters,
management of the banks.
Banking Supervision Department
It ensures enforcement of regulatory and supervisory policies, monitors risk
profiles, and evaluates operating performance of individual banks and also of the
overall banking system.
Economic Policy Department
It 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.

17. DEPARTMENTS
Exchange & Debt Management Department
Its function is effective and efficient execution of monetary and exchange rate
policies through money market and foreign exchange operations. It also performs
domestic debt management function.
Exchange Policy Department
Its functions include formulation and regulation of policies relating to foreign
exchange matters.
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.

18. DEPARTMENTS
Payment System Department
It is set up recently to implement Real Time Gross Settlement (RTGS) project, and
to oversee the existing payment and settlement system in place and develop a
strategy with the banking industry for improvement in the banking system.
Research Department
It makes objective analyses of economic developments; explore inter-linkages
between macroeconomic policies; and examine their relationships with overall
economic growth,
Statistics Department
The Department is responsible for collection, compilation, and publication of
statistics on economic, financial and monetary aspects most pertinent to the
central banking.

19. DEPARTMENTS
Human Resources Department
Its objective is excellence at acquiring, developing and retaining the right talent
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.
Audit Department
It provides independent appraisal of all the activities of SBP aiming to add value,
improve operational efficiency, risk management & internal control systems.
Information Systems 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.

20. DEPARTMENTS
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.
Information Technology Department
The ultimate goal of computerization is a gradual transformation towards
paperless environment (through the use of Intranet/internet exchange server)
and to leverage technology to achieve operational excellence.

21. ACCOUNTABILITY TOOLS
Parliament Reports:
The report provided by the State Bank to the Parliament are an important
contribution in an assessment of the performance of the central bank. The
reports aim to provide a candid and objective review of economic policies. The
high level of disclosure, renders SBP’s policies more transparent, and encourages
people to form an objective view of the monetary and banking policies of the
State Bank.
Cabinet:
The Governor, State Bank of Pakistan is invited to participate in the Cabinet
meetings on Annual Budget, Trade Policy and other economic and financial
issues. He also attends the meetings of the National Economic Council headed by
the Prime Minister of Pakistan, Export Development Board, Economic Advisory
Council and other similar forum. On these occasions the viewpoint of the Central
Bank are presented while the Bank’s policies and actions are scrutinized and
questioned.

22. Economic Coordination Committee of the Cabinet (ECC):
The ECC is the highest economic policy making body formed by the Cabinet to
take decisions pertaining to various economic issues transactions involving
government interests and reviews key economic indicators. The ECC normally
meets once a week and consists of all the key ministers heading economic
ministries. The Governor, State Bank of Pakistan is a member of the ECC, fully
participates in the deliberations and reports regularly on major developments
pertaining to the SBP to the Committee.

23. International Financial Institutions (IFIs):
Pakistan is currently implementing a three-year Poverty Reduction and Growth
Facility (PRGF) program with the International Monetary Fund (IMF). The
Governor of SBP being the Governor of IMF for Pakistan is a signatory along with
finance Minister to the agreement with the IMF. As a part of this agreement
Pakistan has to meet anumber of performance criteria, structural conditionalties
and benchmarks. The IMF sends a review mission regularly to monitor the
progress and recommends to the Board whether the tranche of funds can be
released or not. Pakistan has so far successfully implemented the program and
obtained six tranches from the Fund.

24. Auditor General of Pakistan
State Bank of Pakistan is an autonomous body and falls under the purview of
audit by the Auditor General of Pakistan. The Director General Commercial
Audit carries out audit of operations of State Bank of Pakistan every year. The
auditors carry out a comprehensive audit of the business transactions and
submit their report to the Auditor General of Pakistan.
The report is discussed in Departmental Audit Committee of the Ministry of
Finance and they report serious observations to the Public Accounts
Committee for review and action. For the year 2000- 2001 no observation on
SBP financial statements were reported to the Public Accounts Committee.

25. CONCLUSION
State Bank of Pakistan has its role important in every sector of economy like it is
•Industrial sector
•Agriculture sector
•Consumer sector
State Bank of Pakistan provides guide lines to each of these sectors to boost the
economy. Also it monetize the monetary and fiscal policy and many departments
working own objectives. It is autonomous body and takes decisions
independently.