ALLAMA IQBAL OPEN UNIVERSITY

TUTOR NAME: SMESTER#1 AUTUMN2020

MSc. ADMINISTRATIVE SCIENCES STUDENT:

ASSIGNMENT#2 ROLL NO

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ABSTRACT
This is a report study about Central Bank and its function in a
country. As we know that Central Bank is a very important regulatory
authority too.
So in this comparative study I try to compare mission of Central bank
and its actual Operational role in corporate sector of Pakistan.
State bank of Pakistan is Central bank of Pakistan. SBP history and its
development as central authority. PSB as a bank and as an
institution, as a helping hand to Government all in a glance is
summarized in this report.
Pakistan State Bank SWOT analysis, Conclusion and
Recommendations are also part of the report.
References are shared at the end of the repot.

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ACKNOWLEDGEMENT:

All praises and thanks to Almighty ALLAH for HIS shower of blessings to complete
my work.

I’m thankful to my parent’s Prayers and caring love they show.

And all those who provides guidance at all steps to compile my data like our
Tutor:

And most important my family who helped me in providing sound environment

to finish this target.

Regards

Student name

rollno

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TABLE OF CONTENT change font size here
1. HISTORY OF CENTERAL BANK……………………………..6
2. DEVELOPMENT OF THE CENTERAL BANKS……………7

3. INTRODUCTION TO CENTRAL BANK…………………....9

4. DEFINATION OF CENTRAL BANK………………………….10
5. IMPORTANCE OF CENTRAL BANK………………………..11
6. OBJECTIVES OF CENTRAL BANK…………………………..12
CENTRAL BANKS OBJECTIVES (illustration)……13
PRICE STABILITY………………………………………………………13

FULL EMPLOYMENT………………………………….….14

FINANCIAL STABILITY…………………………………...14
ECONOMIC GROWTH……………………………………………..15

EXCHANGE RATE STABILITY…………………………………….15

7. PRINCIPLAS OF CENTRAL BANKING……………………16

THE ATTITUDE OF NATIONAL WELFARE………………………………….16

MONETRY AND FINANCIAL STABILITY……………………………………16

FREE FROM POLITICAL EFFECT………………………………………………17

STATE BANK OF PAKISTAN…………………………………….19

MISSION STATEMENT OF SBP.................................…...19

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HISTORY OF STATE BANK OF PAKISTAN……………….…20
ORGANIZATIONAL STRUCTURE OF SBP……………….…21
LEGAL FRAME WORK OF SBP………………………………..22
FUNCTION OF SBP AS A CENTRAL BANK……………….23
TRADITIONAL AND NON-TARDITIONAL ILLUSTRAION……..……………………23

TRADIONAL FUNCTIONS OF SBP……………………………..23

ISSUENCE OF NOTES………………………………………………….24

SYSTEM REGULATION AND SUPERVISION………………….25

PRUDENTIAL REGULATION………………………………………….25

SECONDRY FUNCTION OF SBP…………………………………………..26

BANKERS TO THE GOVERNMENT…………………..............26

AS BANKER TO THE GOVT…………………………………………26

PUBLIC DEBT MANAGER……………………………………

MANAGEMENT OF FOREIGN EXCHANGE………………….27

ADVISOR TO THE GOVERNMENT……………………………..27

NON-TRADITIONAL FUNCTION…………………………………28
DEVELOPMENT OF BANKING SYSTEM……………………….28

COMMERCIAL BANKING…………………………………………..28
MICRO FINANCING………………………………………………….29

PROMOTION OF ISLAMIC BANKING………………………….29

TRAINING FACILITY TO BANKERS………………………………29

TRAINING FOR RULER AND ISLAMIC BANKING…………29

CONTROL OF CREDIT AND MONETRY POLICY…………..30

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SWOT ANALYSIS OF PAKISTAN STATE BANK…………………….32
STRENGTH…………………………………….32
OPPERTUNITIES…………………………….33

WEAKNESSES………………………………..33
THREATS……………………………………….34

RECOMMENDATIONS…………………………….35
CONCLUSION………………………………………..35
DATA COLLECTION METHOD………………….36
REFRENCES……………………………………………..36
THANK YOU…………………………………………….37

PLS CROSS CHECK TABLE OF CONTENT PAGE I HAVE DELETED FEW POINTS AND PICS OTHERWISW NOT
NECESSRY OR SIMPLY ERASE PAGE NO

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1. HISTORY OF CENTRAL BANKING:

Greek Temple

Banking was established in history when empires need to sell goods, to do business with
other nations and to keep valuables and money. Historical record were found from Greece,
Rome, Egypt and Babylon, which indicate that temples loan money out to keep it safe.

In Sweden first ever central bank was founded in 1668, which was called Sveriges Riksbank.
Its foundation stems from the failure of Sweden’s first bank, Stockholms Banco in 1656. Shortly
after its foundation. Stockholms Banco became the first bank to formally introduced
banknotes to Europe in 1661.

The banknote was in start very popular as it replaced coins which were heavy and difficult to
handle. However, in the coming years, Stolckholms Banco issued more banknotes than it
could cover its deposits.

As a result consumer no increased as well as circulation of notes also increased too. And problematic
situation created when majority of customer asked for their original coins.

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It didn’t have enough coins to meet its obligations and therefore went bankrupt. As a result, consumers
were left with banknotes that were worth nothing.

This subsequently led to the nobility of Sweden taking over the bank and creation of the
Sveriges Riksbank.

The Severiges Riksbank took charge of monetary policy, taking official control of coinage and
the supply of money. It also banned the use of all banknotes due to the severe crisis caused
by its initial adaptation. However, two centuries later in 1874, it was to re-introduce
banknotes in the market.

2. Development of the Central Bank:

The first central bank of the world is the Risk Bank of Sweden which was founded in
1558.But the real credit of the development of central banking goes to bank of England
which was founded in 1694

BANK OF ENGLAND PICTURE

It is called the Mother of central Banks. It performed the task of issuing notes at the time of
its foundation but gradually it started performing other important task of Central Bank and
emerged as the most powerful bank of the world.

After this the Central banks were established in many countries of the world, following this example
Bank of France in 1800 and Bank of Netherland in Holland in1814,National Bank of Denmark in
Denmark in 1818 and Bank of Spain in Spain.

In 1856, Bank of Russia in Russia in1860 and Reich’s Bank of Germany in 1875(now it is
Deutsche Bundesbank) were setup.

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Similarly the Central Bank were started setting up in their countries as well.

But the central banks established in the 19th century did not have any particular principle. These
mainly worked as the government’s banker and issued paper notes.

But the central bank really developed in 20th century did not have any particular principle.

These mainly worked as the Government’s banker and issued paper notes. But the central
bank really developed in 20th century. Federal Reserve System was setup in the USA in 1914. It
is a federation of 12 Federal Reserve Banks.

OLD BRITISH NOTE

3. INTRODUCTION TO CENTRAL BANK:

As banking concern Central bank is also a bank too with banking functions, which
usually banks do in their routine.
But at high position many additional function and special tasks are being done by
Central bank too which makes it very different than others too.

Central bank is now a day a need for a country without which a country internal
monetary functions cannot be run.
Not only monetary functions but on large monitoring total banking system in
whole country and reserves check and balances, foreign dealings, currency
control is done by Central bank.
Central bank has advisory position to government for it’s polices to make for betterment
of nation.
All the more mundanely, a Central bank is generally an administration
authorized bank that has explicit obligation identified with the exhibition of the
large scale economy.

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 Commonly, an “official” Central bank is charged by a Central government to control
the money supply to advance financial security.
Most industrial economies have a central bank.
The Bank of Britain, the Bank of Japan, the German Bundesbank and the USA
Central bank are largely central banks.
Inward dependability implies keeping the buying influence of the money in
consideration and forestalling it’s weakening. It needs to keep up the money in
consideration and forestalling it’s weakening. It needs to keep up the pace of
expansion inside passable cutoff points if its diminishing isn’t attainable by and large.

Outside strength infers keeping of a harmony among fare and import or counteraction of
the unfamiliar trade estimation of homegrown cash from devaluation. Just as low swelling a
Central Bank, will consider other large scale financial goals like monetary development and
joblessness.

The development of the economy of a nation relies upon the banking system of that country generally
and there is a Central bank or a pinnacle bank at the highest point of the country.

The central bank of a nation function as the helping hand, guide, and companion for all kinds
of banks in a country. As every nation on earth has their own Central bank with unique
name as Bank of Britain in Britain, Central bank system in the USA, Bank of Germany in
Germany.

A Central bank controls the inventory of cash just as how it arrives at the purchaser .It
cannot just print and infuse cash into economy, yet additionally control business banks
circulation of it. The central bank controls financial approach, which incorporates control
over expansion, trade rates, and the cash supply. It has various tools and policy’s to control
multiple issues. Thus the Central bank use its set of apparatuses to meet its goal. Theses
reach from one country to another, yet for the most part incorporate focuses for expansion,
joblessness, and monetary and financial development.

4. DEFINATION OF CENTERAL BANK

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According to Prof.Kent” It may be defined as an institution charged with the
responsibility of managing the expansion and contraction of the volume of
money in the interest of the general public welfare.”

In the light of the above definitions its fitting definition can be given as follows:

*“The Central or apex bank is organization which controls and

regulates the monetary, banking and credit system of the
country so that the proper economic development of the
country can be in proper direction.”

Indeed, the central bank is the bank of banks. It doesn’t work with the goal of acquiring
benefits. It’s proprietorship and control lies with the public authority.

It rules over the banking arrangement of the country. It likewise plays out the capacity
of guideline of measure of credit.

5. IPMORTANCE OF CENTRAL BANK

Central bank is typically given the duty to help keep the adjustments in the cash supply of a
nation sensible and associated with the financial circumstances of the country. It can expand
the cash supply by selling government bonds to explicitly picked banks. Central bank has
expanded stores to credit out cash. It increment credits to general society, different banks,
organizations etc.

At the point when an economy is in a downturn, at that point the central banks can infuse cash
into the economy to help interest by lessening loan fees.
They use different strategy to maintain economy throughout the year cycle.

Central bankers need to judge what’s going in their homegrown business sectors, yet in
addition in worldwide business sectors, particularly for those nations that are a lot of open
to global exchange and speculations, both internal and outward.

Since Central banks assume the pivotal part of setting loan fees they should be followed and concentrated
by a major (and surprisingly specialized) Forex merchant.

Central bank need to accomplish financial strength of their money (for example fight
swelling) and keep up generally monetary development in their country. Central banks act in
approaches to reduce the impacts of swelling on an economy.

Expansion indicate change in value levels which causes a fall in the buying force of a money.
Something represents a whole crate of merchandise and ventures, not simply an increment
in the cost of one thing. Observing costs of a specific crate is known as ordering and gives a
solid strategy for following inflationary development.

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Swelling curiously, expansion can be set off by the increment in cost of only one vital thing
also. The higher financing cost will make the money appreciate according to financial
backers. Both homegrown and unfamiliar, as they will profit by a better return on the
nation’s resources.

Assuming the cash is currently valuing comparative with different monetary standards. Forex
merchants will get tied up with it to exchange with the pattern, sending much more cash
towards that economy.

6. OBJECTIVES OF CENTRAL BANK

The objectives of central banks have generally changed throughout the long term, Because
of awful financial occasions.

For instance, in 1970s, the primary objective of central banks was to guarantee full business.
In any case, the central focus of work blind central banks consideration on swelling.

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Price Stability
Price stability is presumably one of the main objectives of central banks. After the significant
degrees of swelling during the 1970s and 1980s and the catastrophe that was the Economic
crisis of the early 20s of 1929, command over price

Critical component of central banking strategy.

Presently, through a large portion of the created world, the objective pace swelling is 2%.

The purpose behind this is that it is sufficiently high to support utilization, however not very
high to cause alarm purchasing, subsequently making a pattern of more noteworthy
swelling. However it is not excessively low in order to cause an exorbitant measure of
saving.

Full employment:
Revisiting history, full employment was one of the main objectives of the Central Bank. Be that
as it may, as the government assistance state has extended and the comprehension of
financial strategy expanded, it has made a regressive stride. All things considered, full
employment is as yet a moderately significant objective. Most central banks would make a
move if employment fires keeping up.

Normally this is finished by bringing the loan costs down to fuel less expensive credit to
organizations.

Thus organization would utilize the modest credit to contribute and grow its tasks along these
lines invigorating positions all the w

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Financial stability
The Central bank frequently goes about as moneylender after all other options have run out to
keep up financial stability. For example, most business banks need transient credits with the
goal for them to have the option to adjust their resources and liabilities.
Now and again, a business bank may need to pay a credit to another financial
establishment, yet their resources are tied up in long haul advances and other liquid
resources.

Thus they need some momentary liquidity to meet their commitments, which is the place
where the central bank becomes an integral factor.

This is pivotal in the private area as some transient miss-installments could cause serious outcomes.

One little momentary default may lead different foundations to quit working with them and clients
may begin to go somewhere else.

It can destroy the association’s standing and hence forth the trust in it as an association. So the
Central bank is a helping institution in financial stability to maintain banking systems and to
help banks stay stable.

ECONOMIC GROWTH
Financial development is critical to central banks as it by and large methods more positions and
better day to day environments.

When there is financial development, it is regularly connected with expanded business

speculation, improving employment is an objective for central banks yet isn’t really its
fundamental one.

They frequently need to weigh up the advantages and disadvantages, as controlling

expansion and prices might be more useful than in boost up the economy.

Central banks with keeping stability of price try to stable economy of country.

EXCHANGE RATE STABILITY:

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Since May 1999, Pakistan has been following a market –based flexible exchange
rate system. Inter –bank rate applies to all foreign exchange receipts and
payments both in the public and private sectors. Exchange rate is determined
by the demand and supply conditions in the domestic interbank foreign
exchange market.

In FY08 State Bank of Pakistan initiated reform process in the Exchange

Companies sector with a view to bring better market discipline through enhanced
transparency, disclosure, strong monitoring supervision and enforcement. The
most important has been a change in

SBP’s approach from “bringing financial discipline and Corporate Culture to ensuring
discipline, strict compliance and proper corporate governance”.

Exchange rate instability can lead to lower levels of business confidence as they
are unable to adequately plan their investments or business strategy.

This is an even more important factor in today’s inter- connected economics that
rely heavily on international supply chains.

When exchange rate fall heavily, the central bank may look to buy the domestic
currency from the exchange market in a bid to increase its demand and value.

This can help create stability in the market, which could significantly affect importer,
the supply chain and exporters alike.

7. PRINCIPAL OF CENTRAL BANKING:

The Central Bank has its certain principles:

THE ATTITUDE OF NATIONAL WELFARE:

The superb objective of the Central bank is not acquiring benefit. Then again the
business banks have the expectation of acquiring benefit.

MONETARY AND FINANCIAL STABILITY

It is a significant rule of the Central Bank to get money related and monetary steadiness
the banking arrangement of the country.

The Central Bank takes certain actions to satisfy this hypothesis.

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FREE FROM POLITICAL EFFECT:
There can be blunder in the banking arrangement of the nation because
of the effect of the public government issues, on the central bank. It usually
create a huge set

back if political influence is involved in this sector. As a result whole function and
product of national economy will suffer. So it should be free from political
influence.

Along these lines there ought to be the impact of any ideological group on the
central bank. The public authority and the central bank ought to be co-useable in
the improvement of the country.

At the point when the commercial banks don’t get credit from somewhere else
they get it from the Central bank. In this way, there is the need of a Central bank
for giving financial help to commercial bank

STATE BANK OF PAKISTAN

Central bank of Pakistan is called State Bank of Pakistan SBP. Under the State

Bank Act of Pakistan 1956 which gives the authority to function as the Central
Bank of the country. The SBP act mandates the bank to regulate all functions of
monetary and credit system of Pakistan. And it also allows to foster its growth
in the best national interest with a view to securing monetary stability and
fuller utilization of the country productive resources.

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MISSION STATEMENT OF SBP:

To provide reliable banking services to Government, financial institution, Public

and to act as an operational arm of State Bank of Pakistan.

HISTORY OF STATE BANK OF PAKISTAN:

 Before independence on 14th Aug’1947, the reserve Bank of India was the
Central Bank for Subcontinent.

 On 30th Dec’1948 the British Government’s commission distributed the

Bank of India‘s reserves between Pakistan and India 30 % 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).
Quid-E-Azam Muhammad Ali

Jinnah, the founder of Pakistan inaugurated foundation of State Bank of Pakistan

in Karachi. On 1st July 1948

It commenced its first commission. Before nationalization ordinance 1974 SBP shared
51% government contribution and 49% shared by private investor.

It has $13.110 Billion (27th Nov2020) reserves.

 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 limit on government borrowing from the state Bank of
Pakistan.

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ORGANIZATIONAL STRUCTURE OF SBP:

The Central board of State Bank of Pakistan consist of 9 members.

1. THE GOVERNOR (CHAIRMAN OF SBP).

2. SECRETARY FINANCE DIVISION.

3. SEVEN DIRECTORS ARE MEMBERS, ONE DIRECTOR FROM EACH PROVINCE

(NOMINATED BY THE FEDRAL GOVERNMENT).

4. THE DIRECTORS ARE APPOINTED FOR THE TERM OF 3 YEARS.

5. DEPUTY GOVERNERS OF THE BANK MAY ALSO ATTEND THE MEETING OF BOARD IF
REQUIRED, BUT THEY DO NOT HAVE THE RIGHT TO VOTE.

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LEGAL FRAME WORK OF SBP:

*SBP ACT 1956.

*Negotiable Instrument Act 1881.

*payment System and Electronic Funds Transfer Act 2007.

*Electronics Transactions Ordnance 2002.

*Cyber-crime prevention Ordnance 2008.

*Contract Act 1872.

*Banking companies Ordinance 1962.

*Foreign Exchange Act 1944.

*Companies Ordinance 1984.

*Pakistan Telecommunication (Re-Organization) Act 1996.

1. Traditional Functions:

I. Primary Functions, II. Secondary Functions

2 .Non-Traditional Functions

TRADITIONAL FUNCTIONS OF SBP :

Some traditional functions which SBP has to maintain, one is ISSUING NOTE.

ISSUENCE OF NOTES:
 ISSUING OF CURRENCY NOTES:

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*Fixed fiduciary System 1956-1965 which is followed by State bank of Pakistan.
In this system there is new form of Currency principle.

*Central government, issue notes fixed by government and this fixed amount,
backed by government securities and bonds.
*So, if government, issue more currency, then it should be backed by
metallic reserve.
*This strategy has advantage to control over inflation and there is no chance
of currency over issuing in any case.

 Regulate currency in business sector and for public need and economy
climate.

*Assets of issuing department are in the form of gold coins, gold bullions, and silver
bullions. And rest of amount backed by Govt. bonds and Securities. Unusually 25% to
40% is backed by Gold.

Where 60% to 75% is backed by Govt. securities and bonds

*This minimum reserve system have throughout check on increase and decrease
currency supply is according to economy climate.

Where note issuing is a indication in demand of money in the economy. So price

set by = Aggregate demand + Aggregate supply.

* In Pakistan: * 30% against gold reserve.

*70% against Govt. Securities and Bonds.

*This keeping reserve strategy is called Proportional Reserve System.

*Remainder in the form of rupee coins, rupee securities, internal bills of exchange
and other commercial papers eligible for purchase

SYSTEM REGULATION AND SUPERVISION:

According to banking companies ordinance :

The Bank’s activaties should be regulate and supervise.

Autonomy to the State Bank in the area of Banking Supervision.

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84 schedual banks are supervised and revised by state Bank of Pakistan.

9 institutions are supervised by Sate Bank of Pakistan.

PRUDENTIAL REGULATION:
*OFF-SITE AND ON SITE MONITERING:
Off-Site conducted by State Bank through various periodical returns received from
banks and AFI’s . Whereas on side is undertaken on the concerned bank.

BANKERS TO GOVERNMENT:
* Collect Taxes and other payments.

* Repaying external debt.

AS BANKERS TO THE GOVERNMENT:

*Keep Government deposit.

*Sort term advances to the government.

*Provides foreign exchange for purchasing foreign goods’ repaying goods etc.

*Repaying external debt.

SECONDRY FUNCTION OF SBP:

PUBLIC DEBT MANAGER:
*Also called as public debt or national debt.
* Usually owned by federal or provincial government

*To manage the public debt the State Bank of Pakistan ET securities department in Dec
1999.

*Methods for debt are:

*Issuing Bonds.

*Issuing Securities.

*By offering Bills.

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*Low Economy countries get the loan from strong economy countries.

MANAGEMENT OF FOREIGN EXCHANGE:

*State bank is responsible for external value of currency.

*Reserve and manage the exchange control.
*Fixing value of currency.
*Check currency flight in and out.
*Agent of Government of Pakistan and represent Government with IMF and
World Bank.

ADVISER TO THE GOVERNMENT

*State Bank of Pakistan act as adviser to the government.
*Loan Operation.

*Agriculture Credit. *Industrial

Finance.

*Exchange Regulation.
*Banking and Credit Control.

*Debt Management Issue.

*For receiving Funds.

*Making Payments.

*Clearing checks issued by Government.

NON-TRADITIONAL FUNCTION:

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DEVELOPMENT OF BANKING SYSTEM:
*Prominent contributed to facilitate in fostering and economic development.

*Collapse with non-Muslim banks.

*Dependent in monetary function. It includes:

*Commercial Banking.

*Microfinance.

*Promotion to Islamic Banking.

COMMERCIAL BANKING:

*Reserve internal banking for Pakistani banks.

*To give permission to foreign banks to open offices.

*Remarkable growth in commercial sector.

MICRO FINANACING
*State Bank of Pakistan promotes Micro finance in Pakistan.

*Facilitates to micro finance banks.

*Khush hali bank setup in public places.

*First micro finance (FMFB) limited: in private sector.

*Paid up capital required for commercial bank.

PROMOTION OF ISLAMIC BANKING

*State Bank of Pakistan first promotes Islamic banking through:

pg. 22
1. Conferences, seminars, presentation and workshops.

2. Develop better coordination in banking of all sector with Islamic banking.

TRAINING FACILITY TO BANKERS:

Pakistan State Bank provides some important facilities to bankers too which are
as following:

*PSB provides facility as Institute of Pakistan banking to training other banks and
individuals. This institute NIBAF was established during 1981-82.
*Training department facility.

*National Institute of Banking and Finance (NIBAF) is a non-profit institute of State

Bank of
Pakistan which provides training to the trainees and executives all over Pakistan.

*Training on ruler Finance, IMF and World Bank. NIBAF is an independent subsidiary.

*It provides scholarship for PHD.

TRAINING FOR RULER AND ISLAMIC BANKING:

*Through NIBAF State Bank designed a model on Islamic banking.

*IB revised topics on Islamic economics, Islamic Banking and Finance.

*Launched a training program for Bankers.

*Objective is to create awareness among the farming community and sharing of

knowledge with stake holders.

CONTROL OF CREDIT AND MONETRY POLICY:

 It regulate monetary and credit system.

 Central board of the bank formulate it and monitor by taking into account federal
government target.
 SBP ensure flow of liquidity towards private sector.

pg. 23
SWOT ANALYSIS OF PAKISTAN STATE BANK:
STRENGTHS:
* Pakistan State Bank is a nationalize authority and independent in its working. Direct
instrument to control economy is perceived to be reliable, at least initially, in controlling
credit aggregates or both the distribution and the cost of credit.

*The structure of verification, authorization, checking and counter checking of transactions is

very sophisticated, reliable and strong. This is major reason why fraud and false payment
cases are rare in SBP-BSC.

*SBP has monopoly in its role of interest rate structure, Price stability, Exchange control,
building up a sound banking system, Training facility for bankers, Promotion of export
finance, credit targets, Assistance to specialized financial institutions and agency functions
like management of public debt etc.

*It has strong internal control for transaction therefore no fraud has ever been done.

*Job securities, good salary packages and benefits for employees attract and retain talent.

*Employees of SBP-BSC enjoy good salary packages and benefits.

For example interest free loans are given for building house and buying car etc. employees feel
secure because of the permanent nature of job.

*Being a Nuclear Power State Bank.

*Overall SBP are extensive land, natural resources, strategic location, workforce, massive
consumer market, infrastructure facilities, effective legal system and 2/3 of the country’s
unexplored area.
So it is very strong at resources.

OPPORTUNITIES:
*Effective regulatory framework.

*Protection of investment.

*Guaranteed remittance capital & dividends.

*Massive consumer market

*Competitive advantage due to cheap work force and liberal investment and trade policies.

pg. 24
*Abundance of natural resources, Water, Solar, Wind, unexplored areas.

WEAKNESSES:
*Imbalance of payment.

*Weak Economic condition of country.

*Slow bureaucratic processes.

*Missing links between key players (Ministry of Planning, Industries,

Production, Commerce, Investment, SBP, FBR, etc.) *Corruption, Disloyalty at
various levels.

*Crumbling Infrastructures (Operations can be disturb by political and governmental influence.)

*Monetary Policy decisions are related with interest rate and money supply can be very
complicated and this policy implementation only can be understood by those people who
have strong economics and finance back ground.

*One of disadvantage of foreign expert help in State bank policy making department is that
monetary policy makers are too close to their experienced financial world that their policy does
not cover ground reality of underdeveloped country such as Pakistan.

*Moreover if central bank made mistake or took a kind of decision which is not appropriate they
might not be accountable for until their term is over. This is a kind of loop hole which should be
fixed.

*Bank –by-Bank controls hold back competition in financial markets which could benefit both
borrowers and depositors.

*Selective credit controls on some banks but not on favored ones, distort markets and impose
a cost on society.

*Direct controls encourage disintermediation into non-controlled markets or abroad. So

overtime they become less effective as lenders and savers search for ways to circumvent
them.

THREATS:
*Political instability.

*Witch Hunting attitude.

*Frequent change in policies.

*Intermittent supplies of Utilities.

pg. 25
*Law and order situation in the court.

*Regional unrest: Afghanistan, Kashmir, Iran and India in

case of international investment point of view.

*International MKT targeted Nuclear Power status.

*World Bank and World power influence Policies.

Conclusion:
State Bank of Pakistan has its important role in every sector of economy like it
in

*Industrial Sector

*Agriculture Sector

*Consumer Sector

State Bank of Pakistan provides guide lines to each of these sectors to boost
economy. Also it monetize the monetary and fiscal policy and many departments
working own objectives. Which at the end effect deeply on corporate sector
which is main hub of activity of a country.

It is autonomous body and takes decisions independently.

Recommendations:
*Focus on public awareness regarding detection of counterfeit notes through print
and electronic media.

pg. 26
*Discouraging public to go to informal channels for discounted payments of non-issuable
notes.

*Encouraging public to keep the country notes in wallets to achieve the objective
of clean note policy.
* Updating manuals.

*Discouraging back marketing of fresh currency notes.

*No Political influence at all.

*Finance Experts and Economist should be aware of history and dynamics of

Pakistan and should made best accommodating policies accordingly for betterment
of country’s financial situation.

*Investment in weak corporate sectors should be done to give economy a boost.

( Especially in this covid situation). Although revenue earning of SBP due to Covid
situation is dropped too.

*PSB must try investment in profitable short term projects in neighboring countries.

*With a strong marketing and elastic policies PSB should launch projects for foreign
investors.

DATA COLLECTION METHOD:

Choice of Target Company According To given topic Central Bank is only one
institution in Pakistan which is State Bank of Pakistan. And its head office is situated
in Karachi and Islamabad.

Due to covid situation and distance to head office I mostly select data from Google
search engine and websites which are mentioned in references.

References:
1. https://d-nb.info/1138787981/34
2. ^ "Data" (PDF). State Bank of Pakistan.
3. ^ Shahid, Ariba (2020-04-11). "Can the monetary system ever say Bella Ciao?". Profit by Pakistan
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8. ^ Alliance for Financial Inclusion (30 September 2011). "Maya Declaration Urges Financial Inclusion for
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THANK YOU

HAVE A NICE DAY

pg. 28