Presented by: Sana Rahat

Ayesha Rasheed

Introduction

The State Bank of Pakistan (SBP;Urdu: ) is

the central bank of the country.
State Bank of Pakistan (SBP) is unique in the sense that it
started its function in a newly born country,
It is the apex body of Pakistan
The vision of its founders was a stable monetary system in
Pakistan with fuller utilization of the country's productive
resources (SBP Act, 1956).

Introduction

State Bank of Pakistan

Head Quarter

Karachi ,Pakistan

Established In

July 1, 1948

Governor

Ashraf Mahmood Wathra

Reserves

US $ 20.450 billion

Mission

To provide reliable banking

services to Government,
financial institutions, public
and to act as an operational
arm of State Bank of Pakistan.

Vision

Our vision is to develop the

SBP BSC (Bank) into a strong
and
dynamic
institution,
equipped with an efficient and
professional human resource
base, having the requisite
technology and fully capable of
providing quality service to
stakeholders,
while
complementing the State Bank

Goals

To enhance profitability and

maximization of SBP share through
increasing leverage of existing customer
base and diversified range of products.
Excellence in Direction
Excellence in Growth Excellence
in Performance
Excellence in Management
Excellence in Achievement

CORE VALUES

Int
egr
ity

T
e
a
m
w
Ex o
ce r
lle k
nc
e

Ac
co
un
ta
bil
ity

Re
sul
t
ori
en
te
d

Cou
rag
e

History of SBP

Before independence, the Reserve Bank of India was the

central bank of sub-continent.
Ratio of 70:30 between India & Pakistan.
30% reserves was equal to Rs 750 million.
RBI continued its duties as central bank for both countries

History

Victoria Museum Building at the Ingle

Road was rented from the Karachi
Municipal Corporation and swiftly
refurbished.

Timeline of History

First Governor of SBP

1st Governor Zahid Hussain
Took Office

June 10,1948

Left Office

July19,1953

Time in
Office

5 Years , 40 Days

Organizational Structure
of SPB

Current Governor of SBP

Name

Mr. Ashraf Mahmood Wathra

Appointed on

April 29,2014

Experience

35 Years of commercial and investment

banking experience

Prior to SBP

Served National Bank of Pakistan

Habib Bank Limited(1999-2012)

Educational
Qualification

Faysal Bank(1992-1999)

Masters Degree in Business

Administration

SBP BODs-10 members

Chairman: Mr. Ashraf Mahmood

Wathra
Governor

Dr. Waqar Masood Khan

Secretary, Finance Division,
Government of Pakistan
Appointed on April 16, 2013

Dr. Tariq Hassan

Mr. Mohammad Riaz

Khawaja Iqbal Hassan

Mr. Ardeshir Khursheed Mark

Hafiz Mohammad
Yousaf

Mr. Zubyr Soomro

Mr. Sarmad Amin

Sahar Z. Babar

Departments of SBP

State bank of Pakistan have 28 departments

Department

Function

Agriculture Credit and

Microfinance Banks

Establishing funding
mechanisms.
Creating financial literacy.

Banking Inspection Department

2

Maintain soundness of the

financial system
Safeguarding the interest of
depositors

Banking Inspection Department

1

Entail the emerging risk areas

CAMELS Framework

Banking Policy & Regulations

Department (BPRD)

Incorporating required
improvements in the existing
regulatory environment;
Adaptation of the international
best practices

The Banking Surveillance

Department

Supervise financial institutions

Managing various types of risks

Domestic Markets and

Monetary Management
Department

Implement the Monetary

Policy

Exchange Policy Department

(EPD)

Overall stability of the foreign

exchange market
Engaged in the process of policy
formulation and implementation.

Economic Policy Review

Department

publish SBPs Annual Report and

Quarterly Reports,
The State of Pakistans
Economy,

External Relations Department

Press releases in English and Urdu,

Finance Department

Custodian of SBPs books of

accounts.

Legal Services Department

Identification of opportunities

Information Systems &

Technology Department

Reduce operating costs,

Improve end-user
performance, and Meet
overall business goals.

Infrastructure, Housing & SME

Finance Department.

Enabling regulatory framework for

SMEs, Assessing their credit
needs

Internal Audit & Compliance

Department

Risk Management, Controls, and

Governance Processes to
ascertain the adequacy and its
proper functioning.

International Markets &

Investments Department

Managing cash flow for all

currencies
Managing cash for government
debt payments

Islamic Banking Department

Shariah compliance framework

Monetary Policy Department

(MPD)

Macroeconomic Framework
and Forecasting Division
Monetary and Credit Analysis
Division
Policy Formulation Division

The Corporate Secretary

Good corporate governance

practices,

Off-Site Supervision &

Enforcement Department

Ensures effective enforcement of

regulatory and supervisory
policies,
Monitors risk profiles,
Evaluates operating performance
of individual banks

Payment Systems Department

Publishes high quality research in

economics and finance in the form
of short notes, working papers,
and journal articles

Risk management department

Monitoring the compliance of

tolerance limits defined in risk
policies & procedures

FUNCTIONS OF SBP

Traditional Functions

Issue of Notes

Primary
Functions

Regulation of
Financial
System
Conduct of
Monetary
Policy
Lender of last
resort
Banker's Bank
Government
Bank

Secondar
y
Functions

Management
of Public Debt
Management
of Foreign
Exchange

Primary Activities
Sole Authority to Issue Notes
Under Section 24 of the State Bank of
Pakistan Act, 1956.
Departme
nts
Issuing
Departme
nts

Banking
Departme
nts

There are four issue departments one each in four provincial

capitals
Karachi,
Lahore,
Peshawar and
Quetta.
Under section 30 of the State Bank Act, 1956 the assets of the
Issue Department should at no time fall short of its liabilities,
i.e. Total notes issued.

Of the total amount of the assets

of the Issue Department, a
stipulated
amount,
which
Government can vary from time to
time, is to be kept in the form of
Gold coins,
Gold bullion,
Silver bullion,
special drawing rights held with
IMF,
or approved
foreign
exchange.

The remainder of the assets of Issue

Department should consist of
Rupee coins,
Rupee securities and the
Internal bills of exchange and other
Commercial papers
as are eligible for purchase by the Bank under
Section 17 (2a, 2b, & 2d) of the SBP Act, 1956.

Issuance of Commemorative
(Yadgari) Notes
The State Bank also issues
"Commemorative (Yadgari)" notes and
coins of different denominations at
occasions of national importance.

Yadgari Notes

Banker to Government
It acceptsthe depositsof
cash,cheques anddrafts bythe
Government
The Federal andProvincial
governments canobtain
advancesfrom the Bank
On behalfof Governmentsthe
Bankalso undertakes sale/purchase of
gold, silver, approved foreign
exchange

Lender of the Last

Resort
SBP provides loan and re-discount facilities
to scheduled banks in times of dire need.
provided against government securities, trade
bills, agriculture bill, etc.
short-term in nature

To bring flexibility- 3 day Repo facility was

introduced in Feb1992
Against the 3-day repo facility, funds
are allowed by accepting
Market Treasury Bills/ Federal
Investment Bonds/ Pakistan
Investment Bonds

Bankers Bank
Keeps
thedeposits
ofcommercia
Extensive
l banks,
Remittances
whichprimar
facilities to
ilyconstitute
banks at a
the statutory concessional
reserves of
rate
scheduled
banks

Manages the
operations of
clearing houses.

Regulation of Financial System

SBP safeguard the soundness of the

financial system.
State Bank ofPakistan has been given
vast powers underthe
State Bank of Pakistan Act, 1956,
Banking Companies Ordinance, 1962,
Banks Nationalization (Amendment)
Act, 1974 and
Microfinance Institutions Ordinance
2001

The financial sector in Pakistan comprisesof

Commercial Banks,
Specialized banks,
Development Finance Institutions,
Microfinance Banks,
Non-banking Finance Companies (NBFCs)
Modarabas,
Stock Exchange and
Insurance Companies.

Supervision

Off-site
Monitoring
regular checking of various returns
received by banks

On-site
Monitori
ng
in the premises of the concerned
banks when required.

Prudential Regulations for different areas

Corporate and Commercial
Banking,
Small and Medium
Enterprise Financing,
Consumer Financing and
Micro Financing while
those for Agriculture
Financing

Prudential Regulations for Corporate and Commercial Banking

The regulations focus on

Credit Risk Management,
Corporate Governance,
Anti-Money Laundering and
Operations.

Prudential Regulations for Consumer Financing

Encourage the banks to diversify their loan portfolio

It covers any financing allowed to individuals for

meeting their
personal,
family or
household needs and include credit cards, Auto
Loans, Housing Finance and other consumer
financing.

Prudential Regulations for SME

Financing

It encourage the flow of bank credit to the SME sector,

keeping in view their important role in the economic
development. Its features are;
Shift from collateral based lending to cash flow based lending
Maximum limit of clean financing against personal guarantees
increased to Rs. 3 million for SMEs.
The requirement for banks/DFIs to obtain copy of accounts has been
relaxed for exposures of up to Rs.10 million.

Prudential Regulations for Micro Finance Banks

No (MFBs/MFIs) shall commence

business unless it hasa minimum paidup capital as prescribed in MFIs
Ordinance 2001.
Maintain equity = at least 15% ofits
risk-weighted assets.
Maintain a cash reserve = not lessthan5% of its
time and demand liabilities in a current account
opened with the SBP or its agent.

Cannot extend loans exceeding Rs.100,

000/- to asingle borrower.

Conduct of Monetary & Credit Policies

Indirect
Instruments
Statutory Reserve
Requirement, and
Statutory
Liquidity Ratio
Open Market
Operations
Discount rate (3day repo rate),
T-bill auction
rate,

Direct
Instruments
Credit ceilings,
Set credit/deposit
ratio,
Fix margin
requirements,
and
Control the rate
of return.

Indirect Instruments
Reserve Requirement
percentage of commercial banks liabilities which
they are required to hold as reserves at the central
bank.
Statutory Cash Reserve Requirements (CRR)

Presently the requirement is

5% on weekly average basis
subject to daily minimum of 4%
of Time & Demand Liabilities

Statutory Liquidity Ratio

Commercial banks are required to keep some
fraction of their assets in the form of
cash,
Treasury Bills (T-Bills) or
other approved securities.
This fraction is called Statutory Liquidity Ratio.
Main objective
to ensure that banks have sufficient funds in the
form of liquid assets.

Current SBP Statutory Liquidity

Ratio
Presently the requirement is 15%
(excluding 5% statutory cash reserve) of
the total of its time and demand
liabilities in Pakistan

Open Market Operations-ASK

Initiated

January 1995

Till October 1995

Unidirectional

After October
1995

Bidirectional

Mop-up liquidity in case of excess

Refrained to inject liquidity in case of
Liquidity crunch

Repo transactions are used to mop

up liquidity and Reverse Repo to
inject It.

Open Market Operations

SBP
Injects Money by
lending
against
collateral
through
reverse
repo
transaction or by an
outright purchasing

SBP mops-up
Money from
market by
selling
Securities or by
Repo
Transaction

SBP OMO JUNE 10,2016

T-Bills Auction System

6
month
s
3
month (24
weeks
s (12
weeks) )

12
month
s (1
year)

The Six months T-bill is considered the most important

benchmark and is considered to be the signaling tool of SBP
for interest rate movements

Procedure of SBP
Auction of MTBs are conducted on alternate
Wednesdays.
Selected
Financial institutions i.e. Primary
Dealers are allowed to access the auction.
Two days prior to conducting of auction MTB
auction target is announced keeping in view,
Government borrowing position, SBP monetary
policy stance and money market situation.
Two days prior to opening of bids a tender
Notice, inviting sealed bids in MTB auction, is
publicized in Newspapers and displayed on
Reuters.

February 4 ,
2016

SBP sold
Rs319.93 billion
worth of treasury
bills in an auction

Target
Rs 350 billion
target was set for
auction

April 6,2016

All bids rejected by

SBP
received bids of
Rs.339.12 billion

Target
Rs 300 billion

SBP 3-Day Repo Rate

SBP provides a lending facility to the

scheduled banks for up to 3 days
through Reverse Repo transactions.
The interest rate charged on this facility
serves as the main tool to give interest
rate signals to the money market.
Increase in this rate gives a signal of
monetary tightening.

SECONDARY FUNCTIONS

Public Debt Management

The Bank is responsiblefor the

management of government debt under
sub-section 13(e) of section 17, and
section 21 of the SBP Act, 1956.

The following actions are involved in this regard:

Subscribing Federal
and Provincial
governments
securities at the time
oftheir issue

Sale/purchase of such
securities in
theMoney Market
(through auction,
OMO or discount
window)

Payments of interest
to holders of public
debt instruments

Management of Public Debt

Security Department
In order to efficiently manage the public debt,
adepartment namely, Securities Department
set up in December, 1990 for the businessof
government securities
Exchange &Debt Management Department
(EDMD)
This department was subsequently merged with
foreign exchange dealing room and a new
departmentExchange & Debt Management
Department (EDMD) was
created in February, 2000.

Non Traditional
Functions

Non
traditional
functions
Development
of
Banking

System

Commerci
al banking
Micro
Finance
Promotion
of Banking
Islamic

Training
Facilities
To Bankers
Institute of
bankers
Pakistan

Training
Departme
nt
NIBAF
Training
Islamic
Banking
SEANZA
courses

Scholarshi
p For Ph.D.
Training
For Rural
Finance

Development
of
Financial
Institution

Credit to
Priority
Sectors
Credit for
Agricultu
re
Export
finance
scheme

Development of banking
system

At the time ofindependence

The commercial banking system in
Pakistan had virtually collapsed with the
closure of large number of bank offices
which were run and managed by nonMuslims who migrated to India.
No independent monetary authority, and
the Government of Pakistan had to
resortto the Reserve Bank of India for its
currency and monetary affairs.

Commercial banking

1949
1951
1990

Scheme for setting up the NationalBank of

Pakistan initiated.

Theforeign banks to open new offices only in

port towns or in other large cities
Remarkable growth in the number of offices.

Foreign banks expand across the countrypromoted healthy competition

Micro finance banks

Khushhali Bank
Set up in public sector

TheFirst Micro Finance Bank

(FMFB
set up in private sector.

Also engage in mobile banking

Safeguard the interest oftheir
clients

Promotion of Islamic Banking

In order to meet the latent demand for

Shariah compliant solutions
Create public awareness and develop
better coordination by

 Training Facilities to Bankers

Bank Officers Training Scheme"

introduced within one month of its
establishment.
On July 2, 1948-university graduates
especially with mathematics,
economics and commerce
backgrounds.
in 1950-For clerks, State Bank
introduced departmental examinations
system

Institute of
bankers
Pakistan
Training
department
NIBAF

TRAINING
FACILITIE
S TO
BANKERS

Training in
Islamic
banking
SEANZA
courses
Scholarship
for Ph.D.
Training for
rural finance
Library
services

Institute of Bankers Pakistan

Started functioning from

September 17, 1951.
Conducts annual essay
competition on various
economic issues and
awards prizes to the
four best essays.

Training Department/Division

1981-82 - two Training

Units were established one each at Karachi and
Lahore to cater to the
training needs of the
Bank's staff
Merged with Human
Resource Department in
order to make human
resource managements
more efficient at SBP.

National Institute of Banking and

Finance (NIBAF)

Converted into an independent subsidiary of SBP in

2003
It operates two campuses one at Islamabad and the
other at Karachi (North Nazimabad).
Design and develop training modules/programs.
Training material preparation and publication.
Deliver Domestic and International training
programs.
Evaluate training programs.
Business planning and review.
Provide Support for training programs, seminars
and
workshops.

Training on Islamic Banking

The NIBAF has also designed a module on

Islamic banking and finance in its training
courses designed for State Banks officers.
Courses of the Institute of Bankers,
Pakistan have been revised to include
topics on
Islamic economics,
Banking and
Finance.

SEANZA (SOUTH EAST ASIA,

NEWZELAND, AUSTRALIA)

Scholarships for PhD

Started scholarships for PhD in

economics and finance
These scholarships are available to those
candidates who are able to get
admissions in top ranked universities of
the world.
For domestic candidates, one
scholarship is also available for PhD
student of Pakistan Institute of
Development Economics (PIDE).

Training for Rural Finance

The objective of such training programs is creating

awareness among the farming community and sharing
of knowledge and experience with stakeholders.
The participants of these training courses include
Local/ regional nominees,
Agricultural credit officers from Zarai Taraqiati
Bank Ltd.,
Provincial co-operative banks,
Domestic private banks,
Chambers of agriculture,
Farmers association

Library Services

In order to cater to information needs of the bankers,

researchers, students and general public, a main
library was setup in 1949 at Central Directorate of
State Bank of Pakistan, Karachi.
The library has a rich collection of books, technical
reports, Government documents, periodicals and
magazines mainly relating to the subjects of
Economics,
Banking,
Finance,
Management,
Commerce, etc.

sufficient reading material on Islam (in English,

Urdu, Arabic, and Persian languages) and
literary works in national and regional languages are
also available in the library.
The State Bank library has been financed adequately
through annual budget as well as special grants for
procurement of books and periodical literature.
Interesting news items, features, articles, policy
statements issued by the Government
functionaries, speeches / addresses of
presidents and prime ministers, etc. appearing in
the national dailies

Development of Specialized Financial Institutions

actively participated in setting up a number of specialized

credit institutions designed to meet the long and medium-term
financing needs of various sectors of the economy.
These institutions include
Pakistan Industrial Credit and Investment
Corporation of Pakistan
(PICIC),
Industrial Development Bank of Pakistan (IDBP),
National Development Finance Corporation (NDFC),
Agricultural Development Bank of Pakistan12 (ADBP),
Federal Bank for Cooperatives (FBC) and
House Building Finance Corporation (HBFC).
These institutions were established to provide credit
to industrial, agricultural and other sectors.

CREDIT TO
PRIORITY
SECTORS

Credit for
agriculture
Export
finance
scheme

Credit for agriculture

The Agriculture Credit Scheme was introduced in

1972 by the SBP under SBP Act 1956
scheme was reviewed and renamed as Supervised
Agricultural Credit Scheme in 1986
Scheme was once again entirely revamped in
2001, which included a complete value chain
of farm & non-farm activities, like production,
transportation, packing, polishing, grading,
crating, godowns, cold storage, silos, steel /
metal capsules, along with forestry, poultry,
fisheries ,livestock, dairy products, fruits,
vegetables, marketing & exports

Export Finance Scheme

Conclusion

After analyzing the structure and functions of State

Bank of Pakistan we arrive at a conclusion that
SBP is playing a crucial role in economic
development of our country.
It supervises the financial system of Pakistan to
ensure its soundness and stability.
State Bank is performing well as all of its
operations are well-planned, organized and
foolproof.