Report on Sbp

GROUP NAMES: 1) SHOMAILA KANWAL. 2) MARYAM. 3) SHAZIA. 4) BELA. 5) BUSHRA. 6) SHAHIDA. SUBMMITTED TO: INTRODUCTION OF STATE BANK OF PAKISTAN (SBP) STATE BANK OF PAKISTAN is the central bank of Pakistan. While its constitution, as originally lay down in the State Bank of Pakistan Order 1948, remained basically unchanged until January 1, 1974, when the bank was nationalized, the scope of its functions was considerably enlarged. 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. MISSION STATEMENT State bank mission is to promote soundness and stability of the banking system through positive off- site supervision and prompt enforcement action. VISION STATEMENT Vision is to “transform off-site supervision and enforcement department into a highly professional and dynamic department full equipped to proactively supervision banks and other financial institutions. * HISTORY OF STATE BANK OF PAKISTAN

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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 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 were 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.

These were implemented in June 1948, and the State Bank of Pakistan commenced operation on July 1, 1948 Muhammad Ali Jinnah, the founder of Pakistan, making a speech at the opening of the State Bank of Pakistan. 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 a view to securing monetary stability in Pakistan and generally to operate the currency and credit system of the country to its advantage”.

State bank of Pakistan Implemented in June 1948 and Commence operation on July 1 1948. * FUNCTIONS OF STATE BANK OF PAKISTAN: 1. Banker to the Government:  As banker to the government, SBP:     a. Receives deposits (taxes, fees, fines, etc. ) on behalf of the federal government. b. Disburses payments (tax refunds, interest, etc. ) on behalf of the federal government. c. Manages the national debt—buys, sells, and cashes    government securities and pay interest/profit on them. d. Lends money to the federal government as needed. 2.

Banker to Banks:  As banker to the scheduled banks, SBP:      a. Holds deposits made by them as a part of their required reserves—5% at this time. b. Lends them funds as a “lender of the last resort” to meet their pressing needs by discounting their bills of exchange and other 3. Acts as a Clearing House: Provides facilities, physical and/or electronic, to scheduled banks to clear cheques and other claims drawn against each other—deposited by their customers for collection–by adding up what they owe or owed them and transfer funds from their accounts at SBP. . Supervisor of Banks and other Financial Institutions: One of the fundamental responsibilities of the State Bank is regulation and supervision of   the financial system to ensure its soundness and stability as well as to protect the   interests of depositors. The banking activities are now being monitored through a system of ‘off-site’ surveillance and ‘on-site’ inspection and supervision. Off-site surveillance is conducted through regular checking of various returns regularly received from the different banks.

On other hand, on-site inspection is undertaken by the State Bank in the premises of the concerned banks when required. To broaden financial markets as also to diversify the sources of credit, a number of non-bank financial institutions were allowed to increase substantially. The State Bank has also been charged with the responsibilities of regulating and supervising of such institutions. 5. Issuer of Paper Currency: State Bank has the sole authority to issue paper notes.

It has the prime responsibility  to  control its supply in order to ensure a stable price of money, i. e. , its value  or  purchasing power. Its notes, however, are not convertible into gold or silver. 6. Exchange Rate Management and Balance of Payment: The Bank is responsible to keep the exchange rate of the rupee at an appropriate level  and prevent it from wide fluctuations in order to maintain competitiveness of our exports and maintain stability in the foreign exchange market.

As the custodian of country’s external reserves, it is responsible for management of the foreign exchange reserves. 7. Developmental Role of SBP: The Bank’s participation in the development process has been widened in the form of rehabilitation of banking system, development of new financial institutions and debt instruments in order to promote financial intermediation, establishment of Development Financial Institutions, directing the use of credit according to selected development priorities, providing subsidized credit, and development of the capital market. 8.

Non-traditional Role: 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. To Formulate and Implement the Monetary Policy: The Bank is also in charge of conducting monetary policy which means changing the supply of money in the economy. The tools of the monetary policy are: a.

Changing the monetary base: This directly changes the total amount of money circulating in the economy. The State Bank can use open market operations to change the monetary base. The Bank would buy/sell bonds in exchange for hard currency. When the central bank sells government bonds it receives hard currency in payment, thus reducing the money supply. It buys government bonds and pays hard cash to the sellers, thus, increasing the money supply. b. Changing the reserve requirements:  Monetary policy can be implemented by changing the proportion of total assets that banks must hold in reserve with SBP.

Banks only maintain a small portion of their assets as cash available for immediate withdrawal; the rest is invested in illiquid assets like mortgages and loans. By changing the proportion of total assets to be held as liquid cash, the SBP changes the availability of loanable funds. This acts as a change in the money supply. c. Changing the discount rate:  Banks borrow money from the State Bank by cashing or discounting credit instruments, such as bills of exchange. By raising the discount rate SBP discourages banks to borrow money.

If and when the goal is to increase the money supply, the Bank lowers its discount rate to encourage borrowing by the banks and, thus, helps increasing the money supply. Also by calling in existing loans or extending new loans, the monetary authority can   directly change the size of the money supply. Affecting a change in nominal interest rates:  The contraction of the monetary supply can be achieved indirectly by increasing or decreasing the nominal interest rates. By changing the Discount Rate and by conducting Open Market Operations a change in money supply would affect the nominal interest rates.

A tight money supply tends to increase nominal interest rates while an increase in money supply can help bring down the interest rates. A change in the nominal interest rates influences the overall economic activity, rate of inflation, GDP, and economic growth. MEMBERS OF CENTRAL BOARD FEDERAL GOVERNMENT The Central Board consists of nine members: the Governor (who is Chairman), the Secretary, Finance Division, Government of Pakistan – and seven Directors, including one Director from each Province, to be nominated by the

Federal Government ensuring representation to agriculture, banking and industrial sectors. The Directors are appointed for terms of up to three years. 9 MEMBERS SEVEN DIRECTORS SECRETARY FINANCE DIVISION GOVERNOR/ CHAAIRMAN ONE DIRECTOR FROM EACH PROVINCE 1. Chairman: Yaseen Anwar ( Governor SBP) 2. Dr. Waqar Masood Khan (Secretary Finance) 3. Zaffar A. Khan 4. Mirza Qamar Beg 5. Asad Umar 6. Waqar A. Malik 7. Sahar Z. Babar – Corporate Secretary SBP(Secretary to the Central Board) DEPARTMENTS OF STATE BANK OF PAKISTAN Time Gross Settlement System (RTGS System). * Microfinance Department. * Small and Medium Enterprises Department. * Statistics and Data Warehouse Department. * Agricultural Credit Department. * Strategic and Corporate Planning Agricultural Credit Department. * Agricultural Credit Department. * Research Department. * Risk Management and Compliance Department. * Training & Development Department * Treasury Operations (Back Office) Department. * PROJECTS OF CENTRAL BANK OF PAKISTAN: Pilot project Relaxation for renewable energy

Data warehouse project PROJECTS OF SBP Friendly public transport system SME cluster survey Increase agriculture finance 1-RELEXATION PROJECT FOR RENEWAL ENERGY: Pakistan (SBP) is encouraging the financing of renewable energy power plant projects in the country following the policy of the government to bridge the supply and demand gap of electricity in the country. In this regard, the central banks extended the validity period of Scheme for Financing Power Plants Using Renewable Energy for a further period of two years i. e. 30th June, 2014.

Pakistan (SBP) is encouraging the financing of renewable energy power plant projects in the country following the policy of the government to bridge the supply and demand gap of electricity in the country. In this regard, the central banks extended the validity period of Scheme for Financing Power Plants Using Renewable Energy for a further period of two years i. e. 30th June, 2014. 2-SME CLUSTER SURVAY PROJECT: The State Bank of Pakistan (SBP) launched a new project on clusters survey of 10 important Small and Medium Enterprise (SME) clusters in the country.

The objective of this project survey is to provide credible information base on key SME clusters and sub-sectors of economic importance. Funded by the Department for International Development (DFID), UK, the project will develop key drivers of business of important SME sub-sectors located in various cities across the country 3-PROJECT ON INCREAS AGRICULTURE FIANCE: The State Bank of Pakistan, in collaboration with the provincial governments, has launched Pilot Project Phase II from the Rabi season 2009-10 for enhancing outreach of agricultural financing in the underserved districts of the country.

It will help increase the flow of institutional credit on fast-track basis to the underserved agri-intensive areas of Punjab, Sindh NWFP and Balochistan. 4-PROJECT TO IMPROVE FARMERS ACCESS CREDIT: The State Bank of Pakistan is launching a Special Pilot Project in Sindh from the current kharif season to improve the availability of Agricultural credit to the farmers on fast track basis. 5-FRIENDLY PUBLIC TRANSPORTATION PROJECT: The Federal Cabinet has approved a scheme for launching dedicated CNG buses in major urban cities of Pakistan for efficient environment friendly and as an affordable Public Transport.

The Government of Pakistan will contribute a total of Rs. 677,181/- as subsidy over 5 years towards the cost of one bus which shall comprise of Rs. 300,000/- as upfront grant as part of down payment and Rs. 377,181/- as mark-up subsidy payable in 5 years(on monthly basis). It has been made mandatory for the operators/investors to ply at least 25 buses for a single route. The total amount, initially subscribed by the Federal Government for this pilot project is Rs. 300 million. 6-DATA WARE HOUSING PROJECT:

The State Bank of Pakistan (SBP), is working on a data warehousing project which would provide required data on demand This was stated by Sultana Mehmood, head of the e_business section of the SBP at a talk show, organized by MAR Kit under the Information Technology Commerce Network (ITCN) Asia-2002 held at Expo Centre here the other day. CONCLUSION State bank of Pakistan is the central bank of Pakistan and his responsibilities are to supervise other banks and financial institutions as well as maintain the stability of money in the country.

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