State Bank of Pakistan

Last updated
State Bank of Pakistan
State Bank of Pakistan logo.svg
Seal of the State Bank of Pakistan
StatebankBuilding.jpg
Headquarters of the State Bank of Pakistan
Headquarters I. I. Chundrigar Road, Serai Quarter, Karachi-74000, Pakistan
Established7 January 1948;77 years ago (1948-01-07)
Ownership100% state ownership [1]
Governor Jameel Ahmad
Central bank ofFlag of Pakistan.svg  Pakistan
Currency Pakistani rupee (₨)
PKR (ISO 4217)
ReservesIncrease2.svg $9.120 billion (May 2024) [2]
Reserve requirementsIncrease2.svg 6.00% [3]
Bank rate Decrease Positive.svg 15% [4]
Interest rate targetDecrease Positive.svg 16.5–18.5%
Interest on reservesDecrease Positive.svg 16.5%
Preceded by Reserve Bank of India
Website sbp.org.pk

The State Bank of Pakistan (SBP) is the central bank of Pakistan. Its Constitution, as originally laid down in the State Bank of Pakistan Order 1948, remained basically unchanged until 1 January 1974, when the bank was nationalised and the scope of its functions was considerably enlarged. The State Bank of Pakistan Act 1956, [5] with subsequent amendments, forms the basis of its operations today. The headquarters are located in the financial capital of the country in Karachi. The bank has a fully owned subsidiary with the name SBP Banking Services Corporation (SBP-BSC), the operational arm of the Central Bank with Branch Office in 16 cities across Pakistan, including the capital Islamabad and the four provincial capitals Lahore, Karachi, Peshawar, Quetta. The State Bank of Pakistan has other fully owned subsidiaries as well: National Institute of Banking and Finance, the training arm of the bank providing training to Commercial Banks, the Deposit Protection Corporation, and ownership of the Pakistan Security Printing Corporation. [6]

Contents

History

Before independence on 14 August 1947, during the British colonial era, the Reserve Bank of India was the central bank for the then undivided subcontinent. 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. [7]

The losses incurred in the transition to independence, the 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. These were implemented in June 1948, and the State Bank of Pakistan commenced operation on 1 July 1948.

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".

Initially, a large percent of the State Bank was funded by industrial families, who Quaid-e-Azam promoted. They would allot a percentage of their annual profit towards the functioning of the bank. Most notably, the Valika Family would allocate the largest share amongst these families, who also possessed good ties with the Quaid, since September 1947 when the Quaid laid the foundations of the first textile mill of Pakistan, Valika Textile Mills.

A large section of the State Bank's duties was 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 utilisation of the country's productive resources". In February 1994, the State Bank was given full autonomy, during the financial sector reforms. [8]

On 21 January 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 the State Bank of Pakistan Act, 1956, Banking Companies Ordinance, 1962 and Banks Nationalisation Act, 1974. These changes gave full and exclusive authority to the State Bank to regulate the banking sector, to conduct an independent monetary policy and to set a limit on government borrowings from the State Bank of Pakistan. The amendments to the Banks Nationalisation Act brought the end of the 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 Nationalised Commercial Banks (NCBs) and Development Finance Institutions (DFIs). The State Bank had 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.

The State Bank of Pakistan also performs both the traditional and developmental functions to achieve macroeconomic goals. The traditional functions may be classified into two groups: 1) The primary functions including an issue of notes, regulation and supervision of the financial system, bankers' bank, lender of the last resort, banker to Government, and conduct of monetary policy. 2) The secondary functions including the agency function like management of public debt, management of foreign exchange, etc., and other functions like advising the government on policy matters and maintaining close relationships with international financial institutions.

The non-traditional or promotional functions, performed by the State Bank include the development of a financial framework, institutionalisation 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 Islamisation of the banking system.

The Bank is active in promoting financial inclusion policy and is a leading member of the Alliance for Financial Inclusion. It is also one of the original 17 regulatory institutions to make specific national commitments to financial inclusion under the Maya Declaration [9] during the 2011 Global Policy Forum held in Mexico. In 2019, the SBP launched the National Payment Systems Strategy to lay out a framework for Pakistan to foster a modern digital payments infrastructure. [10]

Regulation of liquidity

The State Bank of Pakistan has also been entrusted with the responsibility to carry out monetary and credit policy in accordance with Government targets for growth and inflation with the recommendations of the Monetary and Fiscal Policies Co-ordination Board without trying to effect the macroeconomic policy objectives.

The state bank also regulates the volume and the direction of flow of credit to different uses and sectors, the state bank makes use of both direct and indirect instruments of monetary management. During the 1980s, Pakistan embarked upon a program of financial sector reforms, which lead to a number of fundamental changes. Due to these changes the conduct of monetary management which brought about changes to the administrative controls and quantitative restrictions to market based monetary management. A reserve money management programme has been developed, for intermediate target of M2, that would be achieved by observing the desired path of reserve money – the operating target.

State Bank of Pakistan has changed the format and designs of many bank notes which are currently in circulation in Pakistan. These steps were taken to overcome the problems of fraudulent activities.

Banking

State Bank of Pakistan building StatebankBuilding.jpg
State Bank of Pakistan building

The State Bank of Pakistan looks into many ranges of banking to deal with changes in the economic climate and different purchasing and buying powers. Here are some of the banking areas that the bank looks into:

Bank assets and liabilities

This is a chart of trend of major assets and liabilities reported by scheduled commercial banks to the State Bank of Pakistan with figures in millions of Pakistani rupees. [11] [12] [13]

YearDeposits
202017,875,958
202120,972,043

Currency Management Strategy

Commercial banks are allowed by State Bank of Pakistan (SBP) to outsource their cash processing functions that includes sorting, authentication and packing of banknotes to cash processing companies. [14]

Governor

The principal officer of the SBP is the Governor. Jameel Ahmed is the current (2022) governor of SBP.

Board of directors

The Board (previously known as the Central Board) consists of ten 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 (and the Governor) are appointed for a term of three years. Traditionally, these directors (other than Secretary, Finance Division) are re-appointed for a second term, though this is not a requirement of the law, and there have been a few exceptions to this practice.

The current Board of Directors consists of the following (there being two vacancies): [15]

Museum

See also

Related Research Articles

<span class="mw-page-title-main">Economy of Pakistan</span>

The economy of Pakistan is categorized as a developing economy. It ranks as the 24th-largest based on GDP using purchasing power parity (PPP) and the 46th largest in terms of nominal GDP. With a population of 241.5 million people as of 2023, Pakistan's position at per capita income ranks 161st by GDP (nominal) and 138th by GDP (PPP) according to the International Monetary Fund (IMF).

<span class="mw-page-title-main">People's Bank of China</span> Central bank of the Peoples Republic of China

The People's Bank of China is the central bank of the People's Republic of China. It is responsible for carrying out monetary policy as determined by the People's Bank Law and the Commercial Bank Law.

<span class="mw-page-title-main">Reserve Bank of India</span> Central Bank of India

The Reserve Bank of India is India's central bank and regulatory body responsible for regulation of the Indian banking system. Owned by the Ministry of Finance of the Government of the Republic of India, it is responsible for the control, issue and maintaining supply of the Indian rupee. It also manages the country's main payment systems and works to promote its economic development.

<span class="mw-page-title-main">Pakistani rupee</span> Currency of the Islamic Republic of Pakistan

The Pakistani rupee is the official currency in the Islamic Republic of Pakistan. The issuance of the currency is controlled by the State Bank of Pakistan. It was officially adopted by the Government of Pakistan in 1949. Earlier the coins and notes were issued and controlled by the Reserve Bank of India until 1949, when it was handed over to the Government and State Bank of Pakistan, by the Government and Reserve Bank of India.

<span class="mw-page-title-main">Central Bank of Sri Lanka</span> Monetary authority and regulator of all licensed banks of Sri Lanka

The Central Bank of Sri Lanka is the monetary authority of Sri Lanka. It was established in 1950 under the Monetary Law Act No.58 of 1949 (MLA) and in terms of the Central Bank of Sri Lanka Act No. 16 of 2023, the CBSL is a body corporate with perpetual succession and a common seal. The Central Bank has administrative and financial autonomy. The CBSL has two main boards in operation, namely, the Governing Board (GB) and the Monetary Policy Board (MPB).

<span class="mw-page-title-main">Bangko Sentral ng Pilipinas</span> Central bank of the Philippines

The Bangko Sentral ng Pilipinas is the central bank of the Philippines. It was established on January 3, 1949, and then re-established on July 3, 1993 pursuant to the provision of Republic Act 7653 or the New Central Bank Act of 1993 as amended by Republic Act 11211 or the New Central Bank Act of 2019. The principal author was Senator Franklin Drilon. It was signed by President Rodrigo Duterte.

<span class="mw-page-title-main">Bangladesh Bank</span> Central bank of Bangladesh

Bangladesh Bank is the central bank of Bangladesh and is a member of the Asian Clearing Union. It is fully owned by the Government of Bangladesh.

<span class="mw-page-title-main">Reserve Bank of Fiji</span> Central Bank of Fiji

The Reserve Bank of Fiji is the central bank of the Pacific island country of Fiji. Its responsibilities include the issue of currency, control of the money supply, currency exchange, monetary stability, promotion of sound finances, and fostering economic development.

<span class="mw-page-title-main">Central Bank of Nigeria</span> State-owned bank in Nigeria

The Central Bank of Nigeria (CBN) is the central bank and apex monetary authority of Nigeria established by the CBN Act of 1958 and commenced operations on 1 July 1959. The major regulatory objectives of the bank as stated in the CBN Act are to: maintain the external reserves of the country; promote monetary stability and a sound financial environment, and act as a banker of last resort and financial adviser to the federal government. The central bank's role as lender of last resort and adviser to the federal government has sometimes pushed it into murky political controversies. After the end of colonial rule, the desire of the government to become proactive in the development of the economy became visible, especially after the end of the Nigerian civil war, the bank followed the government's desire and took a determined effort to supplement any show shortfalls, credit allocations to the real sector. The bank became involved in lending directly to consumers, contravening its original intention to work through commercial banks in activities involving consumer lending.

<span class="mw-page-title-main">Bank of Ghana</span> Central bank of Ghana

The Bank of Ghana is the Central Bank of Ghana. It is located in Accra and was formed in 1957. The Bank of Ghana has Seven Regional Offices in addition to its head office in Accra. The regional offices are located in the following cities, Hohoe, Kumasi, Sunyani, Tamale, Takoradi, Bolgatanga, Wa. The regional offices are responsible for implementing the policies and directives of the Bank of Ghana in their respective regions. They also provide banking services to the government, financial institutions, and the public.

<span class="mw-page-title-main">Central Bank of Somalia</span> State-owned bank in Somalia

The Central Bank of Somalia (CBS) is the monetary authority of Somalia. Somalia has struggled to reestablish a functioning state since the collapse of an authoritarian regime in 1991. Somalia has been cited as a real-world example of an anarchist stateless society and a country with no formal legal system. The Transitional Federal Government, formed in 2004, was recognized as the central government of Somalia. Among other duties, it is in charge of ensuring financial stability, maintaining the internal and external value of the local currency, and promoting credit and exchange conditions that facilitate the balanced growth of the national economy. Within the scope of its powers, it also contributes to the financial and economic policies of the State.

<span class="mw-page-title-main">Central Bank of Ecuador</span> Government-owned institution

The Central Bank of Ecuador is the central bank of the country, and an institution of the Executive Function, which has institutional, administrative, financial, and technical autonomy. It is in charge of executing the monetary policy established by the Monetary Policy and Regulation Board of Ecuador, which has been the institution's highest governing body since October 2021.

<span class="mw-page-title-main">Central Bank of the United Arab Emirates</span> Central bank of UAE

The Central Bank of the United Arab Emirates is the state institution responsible for managing the currency, monetary policy, banking and insurance regulation in the United Arab Emirates.

<span class="mw-page-title-main">Banking in Bangladesh</span>

Bangladesh is a developing country with an impoverished banking system, particularly in terms of the services and customer care provided by the government run banks. In recent times, private banks are trying to imitate the banking structure of the more developed countries, but this attempt is often foiled by inexpert or politically motivated government policies executed by the central bank of Bangladesh, Bangladesh Bank. The outcome is a banking system fostering corruption and illegal monetary activities/laundering etc. by the politically powerful and criminals, while at the same time making the attainment of services or the performance of international transactions difficult for the ordinary citizens, students studying abroad or through distance learning, general customers etc.

Syed Salim Raza is a British Pakistani banker and financier who served as the 15th Governor of State Bank of Pakistan. In September 2018, Raza was appointed to the Economic Advisory Council (Pakistan), the Prime Minister's Economic Advisory Council.

<span class="mw-page-title-main">Nepal Rastra Bank</span> Central bank of Nepal

The Nepal Rastra Bank was established on April 26, 1956 A.D. under the Nepal Rastra Bank Act, 1955, to discharge the central banking responsibilities including guiding the development of the embryonic domestic financial sector. The NRB is functioning under the new Nepal Rastra Bank Act, 2002. The functions of NRB are to formulate required monetary and foreign exchange policies so as to maintain the stability in market prices, to issue currency notes, to regulate and supervise the banking and financial sector, to develop efficient payment and banking systems among others. The NRB is also the economic advisor to the government of Nepal. As the central bank of Nepal, it is the monetary, supervisory and regulatory body of all the commercial banks. development banks, finance companies and micro-finances institutions.

<span class="mw-page-title-main">Y. V. Reddy</span> Former governor of Indias central bank

Yaga Venugopal Reddy is an Indian economist and a retired Indian Administrative Service (IAS) officer of the 1964 batch belonging to Andhra Pradesh cadre. Reddy served as governor of the Reserve Bank of India (RBI), India's central bank, from September 2003 until September 2008.

<span class="mw-page-title-main">Yaseen Anwar</span> Pakistani-American banker

Yaseen Anwar is a Pakistani-American banker who had been the Governor of the State Bank of Pakistan from 20 October 2011 to 31 January 2014. He previously also acted as deputy governor and has 33 years of experience in international banking. Anwar holds a dual Pakistan and US citizenship. He is a graduate of the Wharton Business School at the University of Pennsylvania.

Ashraf Mahmood Wathra is a Pakistani Canadian banker. He served as the 18th Governor of State Bank of Pakistan. He was appointed as the State Bank Governor on 29 April 2014 and served until 28 April 2017.

Jameel Ahmed is a Pakistani banker who has served as the Governor of the State Bank of Pakistan since August 2022.

References

  1. ↑ Weidner, Jan (2017). The Organisation and Structure of Central Banks. d-nb.info (Dr. rer. pol thesis). Technische Universität Darmstadt. Archived from the original on 2020-05-28. Retrieved 2020-05-09.
  2. ↑ Iqbal, Shahid (May 10, 2024). "SBP reserves hit two-year high above $9bn". DAWN.COM.
  3. ↑ Iqbal, Shahid (November 14, 2021). "SBP raises Cash Reserve Requirement limit to contain monetary expansion". DAWN.COM.
  4. ↑ "SBP cuts key policy rate by 200bps to 17.5pc". DAWN.COM. September 12, 2024.
  5. ↑ "Bill to amend State Bank of Pakistan 1956" (PDF). Archived from the original (PDF) on 3 June 2013.
  6. ↑ ""Inflation So High, Cannot Earn Enough": Pakistan Battles Economic Crisis". NDTV.com. Archived from the original on 2023-07-28. Retrieved 2023-07-28.
  7. ↑ "History of banking in Pakistan – of humble origins and vast potential". The Express Tribune. 4 November 2011. Archived from the original on 20 November 2017.
  8. ↑ "State Bank focuses on food security". The News International, Pakistan . 7 April 2012. Archived from the original on 8 April 2012.
  9. ↑ Alliance for Financial Inclusion (30 September 2011). "Maya Declaration Urges Financial Inclusion for World's Unbanked Populations". prnewswire.com. Archived from the original on 7 February 2018.
  10. ↑ "SBP launches National Payment Systems Strategy". The Nation. 2019-11-02. Archived from the original on 2019-11-27. Retrieved 2020-08-23.
  11. ↑ "Data" (PDF). sbp.org.pk. Archived (PDF) from the original on 21 September 2017.
  12. ↑ "Data" (PDF). sbp.org.pk. Archived (PDF) from the original on 21 September 2017.
  13. ↑ "Data" (PDF). sbp.org.pk. Archived (PDF) from the original on 21 September 2017.
  14. ↑ "BR-ePaper | Oct 09, 2020 | Page Back Page 16". epaper.brecorder.com. Archived from the original on 2020-10-05. Retrieved 2020-10-10.
  15. ↑ "About Us / Board of Directors". sbp.org.uk. Archived from the original on 29 January 2018. Retrieved 16 December 2016.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.