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Presentation on:STATE BANK OF PAKISTAN
Presented to:
Riaz Ahmed Mian
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GROUP MEMBERS
WAQAR BUTT MI10BBA004
HASSAN JAVED MI10BBA061
M. AZEEM MI10BBA019
AWAIS TAHIR MI10BBA061
HUSSAIN IJAZ MI10BBA057
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WHAT IS STATE BANK:
State Bank is financial institutionwhich regulates the banking
system of a country.
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INTRODUCTION AND HISTORY In May, 1948 Muhammad Ali Jinnah took
steps to establish the State Bank of Pakistan
immediately.
These were implemented in June 1948
The State Bank of Pakistan commencedoperation on July 1, 1948
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"We must work our destiny in our own way and present to the
world an economic system based on true Islamic concept of
equality of manhood and social justice."
Quaid-e-Azam Mohammad Ali JinnahFounder of Islamic Republic of Pakistan
On the Occasion of the Opening Ceremony of The State Bank of Pakistan on July 1, 1948
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CONTuu
In the beginning the state bank of Pakistan
was charged with the duty to "regulate theissue 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 toits advantage".
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CONTuu On January 21, 1997, this autonomy was further
strengthened when the government issued threeAmendmentOrdinances
which were approved by the Parliament in May 1997
Those included were the State Bank of Pakistan Act,1956, Banking Companies Ordinance, 1962 and BanksNationalization Act, 1974.
These changes gave full and exclusive authority to theState Bank to regulate the banking sector, to conduct anindependent monetary policy and to set limit ongovernment borrowings from the State Bank of Pakistan.
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GOVERNING BODYOFSBP
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CENTRAL BOARD OF
DIRECTORS 1. Governor (Chairman)
2. Mr. Salman Siddique (Member) 3. Mr. Kamran Y. Mirza (Member)
4. Mr. Zaffar A. Khan (Member)
5. Mirza Qamar Beg (Member)
6. Mr. Asad Umar (Member)
7. Mr. Waqar A. Malik (Member)
8. Mr. Aftab Mustafa Khan (Corporate Secretary)
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Our Mission is to promote soundness andOur Mission is to promote soundness and
stability of the Banking System throughstability of the Banking System through
proactive offproactive off--site supervision and promptsite supervision and prompt
enforcement actions.enforcement actions.
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Our Vision is to transform OffOur Vision is to transform Off--SiteSite
Supervision & Enforcement DepartmentSupervision & Enforcement Departmentinto a highly professional and dynamicinto a highly professional and dynamic
department fully equipped to proactivelydepartment fully equipped to proactively
supervise banks and other financialsupervise banks and other financial
institutions under purview of the SBP andinstitutions under purview of the SBP and
initiate prompt enforcement actions.initiate prompt enforcement actions.
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OBJECTIVES OF SBP
Efficient Currency Management
Customers Oriented Banking Services toGovernment Institutions, Financial Institutions
and public
Effective Management of payment system
Successful Implementation of State Banks
polices
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AUTOMATION OBJECTIVES To automate the existing manual systems
(Banking Operations)
To develop a local and wide area network,connecting various departments and field offices
To establish an Enterprise Resource Planningsystem
To design and implement a Data Warehousewherein the data is stored, retrieved, upgradedand extracted for analytical purposes
To develop a Management Information System
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PRIMARYFUNCTIONS
1. Monopoly of Note Issue:
All the notes are issued by SBP whereas the coins are
issued by the federal government.
The bank issues notes under the exchange management
method.
In this system SBP keeps 33% gold, foreign currency or
account in foreign banks of the total value of note
issued.
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2. Controller of credit:
The monetary policy of the bank helps to control
credit in Pakistan. For this purpose the State Bank of
Pakistan use
i. Quantitative controls
ii. Qualitative controls
PRIMARYFUNCTIONS
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i. Quantitative tools
Quantitative tools are used to affect the
supply of credit in the whole economy.These are
a) Bank rate
b) Open market operation
c) Cash reserve ratio
d) Credit targets
PRIMARYFUNCTIONS
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ii. Qualitative tools
Qualitative weapons are selective and
mandatory in nature. They influence creditsin selective sectors only. These are
a) Moral persuasion
b) publicity
PRIMARYFUNCTIONS
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3. Regulation and Supervision of the FinancialSystem:
To perform this crucial role effectively and efficiently,State Bank of Pakistan has been given vast powersunder the State Bank of Pakistan Act, 1956,BankingCompanies Ordinance, 1962, Banks Nationalization(Amendment) Act, 1974 and MicrofinanceInstitutions Ordinance 2001 to regulate andsupervise the activities of Banks.
State Bank to systematically monitor theperformance of every banking company to ensure itscompliance with the statutory criteria, and bankingrules ®ulations.
PRIMARYFUNCTIONS
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4. Bankers bank: if a commercial banks liquidity decreases, State
Bank of Pakistan extends loans to it.
These loans are given by rediscounting their eligiblebills.
5. Lender of last Resort: If a bank reaches at verge of default, SBP takes over
the bank and pays its all the liabilities to thedepositors.
in the history of Pakistan, Bank of Bahawalpurbecame bankrupt, SBP helped it and merged thebank in Allied Bank of Pakistan after paying all itsliabilities.
PRIMARYFUNCTIONS
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6. Bank to the Government: SBP keeps deposits of federal and provincial
governments.
Salaries and pensions of the government employees
are given by SBP. SBP keeps foreign reserves and manages exchange
rates of the currency.
It takes receipts on the behalf of the government.
It keeps records of imports and exports.
PRIMARYFUNCTIONS
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SECONDARYFUCTIONS1. Public debt management:
Act 1944 defines the responsibilities of SBP for public
debt management. The following actions are involvedin this regard:
Subscribing Federal and Provincial governments
securities at the time of their issue. Sale/purchase of such securities in the Money Market.
Payments of interest to holders of public debt
instruments.
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2. Management of Foreign Exchange:
Being responsible for maintaining the external value
of the currency, the State Bank of Pakistan assumed
the charge of management and administration of theexchange system of the country in line with the
Foreign Exchange Regulation Act.
As an agent to the Government, the Bank has been
authorized to purchase and sell gold, silver or foreignexchange and transactions of special drawing rights
with the IMF.
SECONDARYFUCTIONS
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3. Advisor to Government: The State Bank of Pakistan, also acts as an advisor to the
Government on financial and economic matters particularly
with reference to their monetary aspects like
i. Agricultural creditii. Cooperative credit
iii. Industrial finance
iv. Exchange regulations
v. Banking and credit controlvi. Mobilization of savings
vii.State Bank of Pakistan also tenders advice to the
Government on debt management issues.
SECONDARYFUCTIONS
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4. relationship with international financialinstitutions:
The State Bank of Pakistan deals with other internationalfinancial organizations including
i. Bank for International Settlement
ii. The World Bank
iii. Central Banks of foreign countries, etc
Almost all the agreements of Provincial and FederalGovernment with International Financial Institutions(IFIs) are executed through the State Bank of Pakistan.
SECONDARYFUCTIONS
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1. Risk Management & Analysis Division
This Division is responsible for
monitoring different risks
faced/assumed by individual
Banks/DFIs & prescribespolicies/issues guidelines etc for
managing/mitigating these risks.
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2. Basel Accord & Core Principles Division
The primary objective of this division is
to implement the Basel II Accord in thebanking sector. This involves
participating in capacity building of the
banking industry to understand, adapt &implement the Basel Accord & then to
also monitor compliance in this regard.
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3. Banking Sector Assessment Studies Division
This division is primarily responsible
for reviewing and assessing, on
periodical basis, the banking system
performance and its future outlook. The
division also conducts various stresstesting exercises to assess the resilience
of the banking sector to various shocks.
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4. Credit Information Bureau
CIB Collects & disseminates credit data
from & to financial institutions tofacilitate their credit appraisal process. It
maintains database of all borrowers who
avail credit facilities from financialinstitutions & provides online access to
financial institutions to submit monthly
credit data & to generate CIB reports.
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5.Banking Inspection
Department
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Banking Inspection Department
(BID) is one of the core departments
at SBP. Its mission is to strive forsoundness & stability of the financial
system and safeguard interest of
stakeholders through proactiveinspection, compatible with best
international practices
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BID plays a pivotal role in meetingSBPs main responsibility of
supervising the financial institutions
to maintain soundness of the systemand protection of the interest of
depositors, thereby ensuring public
confidence in the system.
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In order to assess a financialinstitution, BID conducts regular
on-site inspection of all scheduledbanks inclusive of the foreignbanks & DFIs.
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6.Financial Markets
Strategy & ConductDepartment (FSCD)
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is one of the three new Departments
constituted on restructuring of
Exchange & Debt Management Department and Investment Services
Cell on September 14, 2006.
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The Department is responsible toformulate Policies & Regulate
conduct of Domestic Money,
Exchange, Securities, and Derivatives
Markets as well as to disseminate
market data/analysis & to set-up
strategies/ products for market
development.
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FINANCIAL ANALYSIS
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FINANCIAL HIGHLIGHTSFINANCIAL HIGHLIGHTS
(Issue Department)(Issue Department)
PARTICULARS 2010
Amount in
billions
Rs
2009 2008
Gold Reserves 220 158 131
Foreign currency
reserves
473 378 439
Investments 672 675 458
Total assets 1377 1224 1046
Total liabilities
(Bank Notes
Issued)
1377 1224 1046
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FINANCIAL HIGHLIGHTSFINANCIAL HIGHLIGHTS
(Issue Department)(Issue Department)
0
200
400
600
800
1000
1200
1400
1600
Gold
Reserves
Foreign
currency
Investments Total Assets Total
Liabilities
2010
2009
2008
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FINANCIAL HIGHLIGHTS (Cont.)FINANCIAL HIGHLIGHTS (Cont.)
Banking DepartmentBanking DepartmentParticulars 2010
Amount in
billions
Rs
2009 2008
Total assets 1700 1378 1127
Net equity 416 377.4 304
Net assets 416 377.4 304
particulars 2010Amount in billions
Rs
2009Amount in billions
Rs
Profit for the year 186.7 201.7
Profits EarnedProfits Earned
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0
200
400
600
800
1000
1200
1400
1600
1800
Total assets Net assets Net Equity
2010
2009
2008
FINANCIAL HIGHLIGHTS (Cont.)FINANCIAL HIGHLIGHTS (Cont.)
Banking DepartmentBanking Department
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0
50
100
150
200
250
Net profit
2009-102008-09
2007-08
2006-07
2005-06
2004-05
Profits AnalysisProfits Analysis
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STRENGTHS
Established through an Ordinance (2001)
which provides regulatory powers to
the Board of Banking Services
Corporation.
Existing Departmental setup and strong
branches/field offices network.
Centralization of authority.
Motivated, dedicated, honest and
experienced employees.
Sole Authority to issue currency notes
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STRENGTHS(Contd.)
Professional competency.
Automation of several business activitiesthrough HRMS and Oracle.
Availability of proper BusinessContinuation Plan (BCP).
SBP has its offices in almost all big cities ofthe country.
Audit Charter duly approved by theGovernor State Bank of Pakistan.
Timely problem solving approach.
Liberalization of foreign exchange policies. Market based approach.
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WEAKNESSES
Manuals not fully compliant with automatedsolutions.
Absence of instructions at various levels.
Massive retirement created shortage ofexperienced, qualified and knowledgeablestaff and middle managers.
Lack of IT skills and functional exposure.
Low computer literacy.
Lack of information sharing and routineapproach of branches.
Lack of data base mechanism for foreignexchange operations.
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OPPORTUNITIES
Improvement in services and reduction
in turn around time for public services.
Adoption of I.T. technology, rapid and
complete computerization of manual
work.
office automation to increase efficiency
and effectivenes
Innovations in Currency Management
System.
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THREATS
Employees demand for proxyreference letters & proxy medicinesfrom banks dispensary.
Possible implications of WTO, E-commerce, etc. on the processes of thedepartment.
External pressures/ frequent changesin Government policies.
Sudden collapse /breakdown ofcomputer system (Power breakdownproblem).
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POLITICAL FACTORS
Political instability
Influence of Government
Fluctuation in rules andregulations of regulatory
authorities like IMF and
WORLD BANK
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ECONOMIC FACTORS
Rate of interest
Inflation
Economic crisis prevailing inthe international market
Unstable foreign exchange
rates
Irregular capital market
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SOCIAL FACTORS
Consciousness about
services
Corruption
Bribery
High rate of crimes
High illiteracy rate
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TECHNOLOGICAL FACTORS
Dramatic Role of Technological
Advancement
Rate of change of Technology has greatly
affected the Rate of growth of Economy
Technology can increase the quality ofservices rendered
Channel of distribution is highly
affected by technology
Technology is offering new way to
communicate with the commercialbanks
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SUGGESTIONS
State bank should make its
monetary policy in favor of
economy
Discount rate and interest rate
should be stable one
Strict islamic banking policies
should be observed
Innovation in IT sector
Strict check and balance of
commercial banks
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CONCLUSION
State Bank of Pakistan is the
regulator of financial and
economic sector in the country.Through its rules and regulation
its trying to stabilize the economic
situation in Pakistan. Its
implementing Islamic injunctionsin day to day banking. Whereas its
trying to improve the balance of
trade and balance of payment.