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Central Bank
State Bank of Pakistan State Bank of
PakistanBy : BBA 6th
Group Member
• Mahpara kanwal• Azhar Hussain• Tahira yaseen • Abdul Rauf Gcuf-sub campus sahiwal
• Zunair Munir
Presentation theme ,Bank,Central Bank
By-Mahpara Kanwal
Student of BBA 6th Department of Management Sciences
GCUF sub campus Sahiwal
Presentation theme:
• Origin • Definition• purpose
Bank
• Definition• Purpose• function
Central bank
• Definition• Board of Director• Aim of the bank• Functions of the
bank• Constitution
State Bank of Pakistan
Conclusion
What is Bank?
Definition:
• Institution
• Providing loans to lend
• And create the credit money
An other Definition Accumulate the surplus
Advance to deficit
The difference between surplus and
deficit called spread earning or profit
organization
What is Bank?
Origin of Bank:
o Italian word;
• Derived from “BANCUS”
• Means “BENCH”
o German word;
• Derived from “BANQUE”
• Means Firm
What is Central Bank?
Definition;o Institute which manage the following activities
• Nation’s currency
• Money supply
• Interest rate
o Oversee, their country commercial banking system
o Also called Reserve Bank Monitory Authority
What is Central Bank?
Origin of Central Bank:
a. Nuremberg conference:
• In 1548, held in Nuremberg, Germany
• To cover the loop holes in banking system
• In 1578, First Central bank was established,
in Geneva, Switzerland
What is Central Bank?
Origin of Central Bank Cont.…b. Brussels conference:
• Before WW1 (1914-18),there was few central banks
• After “WW1” confusion in currency & exchange market
• Which become cause for some banking failure
• So, the conference held in held at Brussels in 1920
• That every state must have their own central bank
Constitutions & Functions of Central Bank
By-Azhar Hussain
Student of BBA 6th Department of Management Sciences
GCUF sub campus Sahiwal
Functions of Central Bank:
Monopoly of note issue
Bankers, Agent and Adviser to the Government
Custodian of Cash Reserve of Commercial Bank
Custodian of Nation’s Reserve of International
Lender of The Last Resort
Functions of Central Bank:
Collection of Data
Central Banking in Developing Countries
Clearing House Function
Credit Control
Other Functions
State bank of Pakistan
Mission statement of SBP
• To provide reliable banking services to Government, financial institutions, public and to act as an operational arm of State Bank of Pakistan
State Bank of Pakistan:
History of SBP:o Before independence, FRBI was the Central bank, Sub-continent
o After independence, FRBI divided,
o Ratio of 70:30 in between India and Pakistan
o And 30% reserve was equal to Rs. 750 million
o Muhammad Ali Jinnah inaugurated SBP,
o Commenced operation in July 1, 1948
o SBP work under State bank act 1956
o Before , Nationalization ordinance 1974
o SBP share capital was 51% Government contribution and
49 % by private investors
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
Central Board of Directors
Chairman: ( Governor SBPAshraf Mahmood Wathra)Dr. Waqar Masood Khan (Secretary Finance)Mirza Qamar BegKhawaja Iqbal HassanMr. Iskander Mohammed KhanMr. Shahid Ahmed KhanMr. Mehmood MandviwallaMr. M. Nawaz TiwanaMr. Muhammad HidayatullahMr. Zafar Masud
Functions of SBPBy-
Tahira yaseen
Student of BBA 6th , Department of Management Sciences
GCUF sub campus Sahiwal
Functions of SBP:
Core functions
Non-traditional functionsTraditional functions
Primary functions Secondary functions
Primary functions of SBP
Primary functions of SBP
A. Issuing Currency Notes:
Monopoly of Note Issue.
o Sole authority of notes issues, except coins
o Work under act of 1956
o Issue offices: located in Karachi, Peshawar & Lahore
o Brings uniformity in the system
o Better control over the money supply
o Increases public confidence
Primary Functions of SBP:
A. Issuing Currency Notes:
Methods for issuing notes1. Fixed fiduciary system 1956-1965
o New form of currency principle
o Central government, issue notes, fixed by Government
o This fixed amount, backed by government Securities
and bonds
o So, if government, issue more currency
o Then, should be backed by Metallic reserve
o Advantage:• Control over inflation• No chance of currency over issue
Primary Functions of SBP:
A. Issuing Currency Notes:
Methods for issuing notes2. Proportional reserve system:
o Notes issues is backed by metallic reserve
o Rest of amount backed by Govt Bonds and securities
o 25%- 40% backed by gold
o 60%-75% backed by Govt securities and bonds
o In Pakistan; • 30% against Gold reserve
• 70% against Govt securities and bonds
Primary Functions of SBP:
A. Issuing Currency Notes:
Methods for issuing notes3. Minimum reserve system:
• Increase or decrease currency supply
• according to economy climate
• Notes issues shows
• Demand for money in the economy
• Price set by= by aggregate demand and
aggregate supply
Primary Functions of SBP:
B. Controller of Credit: To control the availability and cost of credit in the
country through
Purpose; full employment, price stability, increase in production etc.
• Open market
operations
• Variation in bank rate
• Credit rationing
• Varying reserve
requirements
Quantitative control Qualitative control
• Varying margin
Requirements
• Consumer’s credit
regulation
• Use of moral persuasion
• Direct action
Primary Functions of SBP:
C. Regulations and Supervision of banks:
Full power to supervise and control the banks
Banks liquidation
Banks restructuring
Banks performance
Banks valuation
Primary functions of SBP:
D. State bank as Clearing house:
Where representatives of different banks meet
To exchange cheques withdrawn
The state bank then settle the difference
Primary Functions of SBP:
E. Lender of last resort:• Act as last lender of resort for commercial banks
• Used when banks have shortage of cash reserve
• Then, the state bank rescue them, from the danger
situation
• Method used is;o Provide cash by discounting bill of exchange
o And treasury bills
• Safe guard the banks from the liquidation
Primary Functions of SBP:
F. Bankers and Agent to the government:
As Financial Agent:
Collects Taxes and other payments.
Repaying external debts
Keep government deposits
Short-term advances to the Govt
Provides foreign exchange for purchasing foreign
goods, repaying goods etc.
Repaying external debts
As banker to the Government:
Secondary Functions of SBP
By: Abdul Rauf
Student of BBA 6th
Department of management sciencesGCUF –sub campus Sahiwal
Secondary Functions of SBP:
Public Debt Management
Management of Foreign Exchange
Advisor to Government
Relations with IFI’S
Secondary Functions of SBP:
A. Public Debt Management:
o Also called Government debt or national debts
o This may be own by either Federal or provincial government
o The budget deficit actually shows, public debts for particular period
o Method for debts are: Issuing bonds
Issuing securities
By offering bills
Low economy countries, get the loan from super-nation
Secondary Functions of SBP:
B. Management of Foreign exchange: State bank is custodian of foreign exchange
Reserve and manage the exchange control
Fixing value of currency
Check currencies flight in and out
Agent of government, Pakistan's representative
with IMF and world bank
Secondary Functions of SBP:
C. Advisor to the Government:o maintains deposit accounts,
o effects domestic and foreign currency transactions
and provides advice relative to financial matters
o Government holds deposit accounts at central bank
o The account are using for:
For receiving funds
Making payment
Clearing cheques issued by government
Secondary Functions of SBP:
D. Relationship with IFI’S:
Relationship with
Relationship with
World bank
IMF
ADB
Non-traditional Functions of SBP:
Development of Financial Institutions
commercial bank, Micro finance and Islamic banking
Training Facilities to Banker
Development of Specialized Financial Institutions
Credit to Priority Sector
Industrial, Agriculture, Exportation
Monetary policy &Plan of SBP & Conclusion
by :Zunair munir
Student of BBA 6th
Department of management sciencesGCUF –sub campus Sahiwal
Types of monetary policy
• Contractionary / Tight monetary policy“Tight monetary policy, also called
contractionary monetary policy, tends to curb inflation by contracting/reducing the money supply”
• Expansionary /Easy monetary policy “Easy monetary policy, also called expansionary monetary
policy, tends to encourage growth by expanding the money supply
Tools of Monetary Policy
Quantitative Tools Open Market Operations
Bank RateCash Reserve RequirementLiquidity ratioSpecial deposit
Qualitative ToolsCredit rationingCredit ceilingMoral persuasionDirect actionAdvertisement
Targets for monetary policy
• Employment, economic growth, and inflation can not control directly, it must choose settings, or targets, for variables that it can control in order to best achieve its goals.
• In practice, there are two types of targets:1. Money supply targets. 2. Interest rate targets.
Aim of SBP functions:
State bank and Economic Growth:
Crucial role in the economic growth
Facilitating and boosting the economy development
Improving financial market( banks and financial inst.)
Also contribution, capital market improvement(PIBs)
Also help, commercial banks, through export scheme,
by offering export at low rate
Establishing special credit institution, for meeting
medium and large term financial needs
Prudential regulations:
o Code of conduct or guide lines through which state bank
supervise the institutions
o Shows standard format for activities
o To decrease their risk-taking
Definition:
Purpose: Provide safety to depositor’s funds
Keep financial stability
Uniformity in the sector
Perdulation of regulations:
Example:
REGULATION-XVIWINDOW DRESSING
Banks shall refrain from adopting any measures or practices
where by they would either artificially or temporarily show an
apparently improved position of bank’s accounts as given in their
Balance Sheet and Profit & Loss Accounts specially in relation to
its deposits and profit. Particular care shall be taken in showing
inter-branch and inter-bank accounts accurately and strictly
according to their true nature.
Conclusion:
o Bank
o Central bank
o Functions of central bank
o State bank of Pakistan
o Functions of state bank of Pakistan
o Constitution of state bank of Pakistan
o Prudential regulations of state bank of Pakistan
