THE ROLE OF CENTRAL

BANK IN ECONOMIC
DEVELOPMENT OF PAKISTAN

GROUP # 7


Members
1. Syed Usman Roll no.66
2. Mariyam Jahangir Roll no.2
3. Sana Maqsood Roll no.40
4. Rida Akbar Roll no.35
5. Aiman Zubair Roll no.52
6. Muhammad Wasif Roll no.38
7. Sadia Altaf Roll no.28


INTRODUCTION & HISTORY
SYED USMAN
4
THE CENTRAL BANK OF ENGLAND
(HUB OF BANKING)
HISTORY

STATE BANK OF PAKISTAN

DEFINITION:



State bank is an institution that
manages a states currency, money,
supply and interest rates.
HISTORY
At the time of Independence
At the time of Partition
Financial crisis in Pakistan
Making of state bank
Effect of Central Bank On Economic
Development

Departments of Central Bank of Pakistan

11
THE CENTRAL BANK OF
PAKISTAN
MARYAM JAHANGIR
STATEMENTS OF SBP
Statements
of SBP
Mission
Statement
Vision
Statement
MISSION STATEMENT:
To promote Monetary and Financial stability
To achieve equitable Economic Growth and
Prosperity
To provide excellent Banking and Financial services
to stakeholders

VISION STATEMENT:
Vision Statement:
To develop SBP into a dynamic and efficient
organization equipped with requisite technology
and human resource capable of extending
sustainable support to the State Bank of Pakistan in
achieving its objectives
STRUCTURE OF CENTRAL BANK OF PAKISTAN:
Central Board of
Directors
High level of
management
Central Directors
Middle Level
of
Management
Field Office
Low Level of
Management
CENTRAL BOARD OF DIRECTORS

Governor (1)
Deputy Governors (1)
Directors (8)
FIELD OFFICE
The head Office of Bank is in Karachi.
GOVERNOR
First Governor of SBP
Zahid Hussain
EXISTING GOVERNOR
Yaseen Anwar
DIFFERENCE BETWEEN COMMERCIAL BANKS
AND CENTRAL BANK
Difference

Central
Bank
Commercial Bank
DIFFERENCE BETWEEN COMMERCIAL BANKS
AND CENTRAL BANK
1. OWNERSHIP
Owned by the State
Owned by the
private sector
2.
AUTHORITY
Control
Commercial banks
Subordinate to
Central Bank
3. NOTE
ISSUNCE
POWER
Can issue currency
note
Cannot issue
currency note

DIFFERENCE BETWEEN COMMERCIAL BANKS
AND CENTRAL BANK
4.GOVERNING
ACT
SBP ACT 1956

Banking
Companies
Ordinance 1962
5. CREDIT
CONTROL
Can control
Credit
Bound to obey
SBPs advice on
credit control
6. PROFIT
MOTIVE
Non Profit
oriented
Organization
Profit oriented
Organization
ROLE OF STATE BANK IN ECONOMIC
DEVELOPMENT OF PAKISTAN
SANA MAQSOOD






ROLE OF STATE BANK IN ECONOMIC DEVELOPMENT
Establishment of New Books
Establishment of New Banks For the Rapid Growth
In the Economy

Training Of The Bankers
Training of the workers and the Executives

Institute OF Bankers

Establishment OF Stock Exchange
In 1950 SBP Established Stock Exchange In
Karachi
Development of Investment opportunities in
Pakistan






ROLE OF STATE BANK IN ECONOMIC DEVELOPMENT






ROLE OF STATE BANK IN ECONOMIC DEVELOPMENT
Establishment OF Special Financial Institutions
Establishment of special Institutions IDBP,
ZTBL,PICIC
To increase financial Requirements

Equal Distribution Of Loan
Distribution OF Funds And Loans Equally among
Different Sectors
Equal development through Equal Loans Like
Industry, agriculture and commerce etc.







ROLE OF STATE BANK IN ECONOMIC DEVELOPMENT
Export Financing Scheme
Exporters are given Exclusive Loans to Increase
Exports

Measures to Increase Saving
SBP Issues Prize Bonds to develop the habit of
saving
Introduction of different schemes







ROLE OF STATE BANK IN ECONOMIC DEVELOPMENT

Establishment Of Export Promotion Bureau
Export Promotion Bureau was established
Its objects are to increase the quality of products
To increase the exports of the country

29
FUNCTIONS OF CENTRAL BANK
RIDA AKBAR
FUNCTIONS OF CENTRAL BANK

1. Sole monopoly of note issue:

Regulation of currency

undue expansion of notes

notes issued liability
FUNCTIONS OF CENTRAL BANK

METHODS
OF NOTE
ISSUE

1. Fixed
fiduciary
system
2.
Proportional
reserve
system
3. Minimum
reserve
system
FUNCTIONS OF CENTRAL BANK

BANKERS BANK
Custodian of cash reserve

Clearing house

Lender of last resort

Re-discounting

Opening of new bank

Advance policy

FUNCTIONS OF CENTRAL BANK
AIMEN ZUBAIR
FUNCTIONS OF CENTRAL BANK


Stable the credit
money system








Balance of payment
account

Leader of Capital Market

Controller of Foreign
Exchange

FUNCTIONS OF CENTRAL BANK

Custodian of Metallic Reserve
Gold, Silver as a reserve





Price Stability
Inflationary and Deflationary pressure

FUNCTIONS OF CENTRAL BANK

Banker to the
Government
Keeping the
Deposits
Advances
Loans
Foreign
Loans
Keeping of
Accounts
Transfer of
Capital
Financial
Advisor
Govt.
Securities
CUT THIS SLIDE
Banker to the Government:
The functions of the central bank as bankers to the government are as following:
Keeping the Deposits:
The central bank keeps the deposits of the central and provincial governments.It makes makes payments on the
behalf of government.
Advances Loans:
As a fiscal agent,the central bank provides loans to the government and makes investments in treasury Bills and
Long-term Government securities.
Foreign Loans:
Central Bank transefers the capital of central and provincial governments from one place to another.
Financial Advisor:
The central bank also advices the government on economic matters such as controlling inflation or deflation of
currency.
Keeping of Accounts:
The central bank keeps the accounts of different departments of govt.It does not charge any fee or commission.
Govt. Securities:
Central bank is not only the custodian of govt securities;but also works for their sale and purchase.
Trasfer of Capital:
Central bank trasfers the capital of centrl and provincial governments from one place to another.

FUNCTIONS OF CENTRAL BANK

Bankers
Bank
Custodian of Cash Reserve
Clearing House
Lender of last Resort
Re-Discounting of Bills of
Exchange
Opening of New Banks
Advance policy
Growth of Banks

39
CUT THIS SLIDE
Bankers Bank:
As a banker for the commercial banks ,the central bank performs the following functions:
Custodian of Cash reserves:
The commercial banks are required by law to keep reserves equal to a certain percentage of both time and
demand deposit with central bank.
Clearing House:
As a bankers bank, the central bank acts as a clearing house for the settlement of mutual claims of commercial
banks.Since the central bank central bank holds reserves of commercial banks,it transfers funds from one bank
to another to facilitate the clearings of cheques by making entries on the principles of bookkeeping without using
cash.
Lender of last resort:
The central bank lends to the member or scheduled banks in times of stress to save their financial structure.
Re-Discounting:
The member commercial banks can re discount their bills from central bank in time of need.
Opening of New Bank:
A new bank or a branch of an existing bank cannot be established without the prior permission of central bank.
Advance policy:
Central bank regulates the policies of advancing loans for commercial banks and fixes the rate of intrest to be
charged.
GROWTH OF BANKS:
It is the duty of central bank to promote the growth of the banking system on sound footing.

FUNCTIONS OF CENTRAL BANK

Leader of Capital Market:

SBP is considered as the leader or guardian of Capital
Market because it works for the establishment and
growth of the capital market. It also makes policies and
take decisions to avoid the expansion and contraction of
credit money and to establish the credit money system
of our country.SBP has played a very effective role in
improving the capital market.

FUNCTIONS OF CENTRAL BANK

Custodian of Metallic Reserve:

The SBP is a supervisor or custodian of metallic
reserves for eg: Gold and Silver of our country.It keep
them with great care and safety.The metallic metallic
reserve of commercial banks and other financial
institutions are also done the same.

42
FUNCTIONS OF CENTRAL BANK

International Representative

Investments in International market

Credit Control

Monetary policy

MONETORY POLICY
MUHAMMAD WASIF
WHAT IS MONETARY POLICY

The term monetary policy refers to actions taken by
central banks to affect financial conditions
Monetary Policy operates variables such as money
supply, interest rates and availability of credit.


DEFINITION

Monetary policy determines the amount of money
that flows through the economy.(Chad Brooks)

Monetary Policy is concerned with deciding how
much money the economy should have or perhaps
more correctly deciding whether to increase or
decrease the purchase power of money ( Hanson)

AIMS/OBJECTIVES OF MONETARY POLICY

The Goals of monetary policy are to promote
maximum employment, stable prices and moderate
long-term interest rates

The core objectives of Pakistans monetary policy
are to control inflation, maintaining price stability,
strong monetary growth and achieving maximum
employment rate

AIMS/OBJECTIVES OF MONETARY POLICY

Exchange Stability
Control of Inflation and
Deflation
Economic Development
Increase in the Rate of
employment
improvement in Standard of
Living

METHODS OF CREDIT CONTROL

Methods
1) Quantitative
methods
2) Qualitative
methods
METHODS OF CREDIT CONTROL

Quantitative
methods
OPEN MARKET
OPERATIONS
Bank rate policy
Cash and reserve
requirements
Credit rationing
Interest rate policy
Change in margin
Qualitative
Methods
Advertisement
Moral persuasion
Change in margin
Direct Action
QUANTITATIVE METHODS







To accomplish its monetary policy objective, the
Central Bank can use a mix of quantitative and
qualitative tools to influence the supply and demand
of money

QUANTITATIVE METHODS

Open Market Operation
Sale and purchase of government securities by central bank

Bank Rate Policy
Rate at which bank re-discounts the first class bills of
exchange of commercial banks

Cash and Reserve Requirements
Increase or decrease the reserve ratio of commercial banks

Credit rationing
Central bank put limits on the grant of credit on commercial
bank

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MONETORY POLICY
SADIA ALTAF
QUALITATIVE METHODS

The selective measures of credit control
Wants to reduce Credit Supply
Only Certain require sectors of the economy are
affected

QUALITATIVE METHODS

Advertisement
Moral persuasion
Change in margin
Direct Action

AUTONOMY OF STATE BANK OF PAKISTAN

The right or condition of self-government.
a self-governing country or region.
freedom from external control or influence;
independence.

AUTONOMY OF STATE BANK OF PAKISTAN

Full Independence To State Bank
Strong Internal Control
Implementation Of Monetary Policy
Responsible for Setting the discount Rate


PROBLEMS OF SBP IN ECONOMIC DEVELOPMENT

Inflation and Deflation
Change in Governors
Balance Of Payment
Relation With International Agencies
Poor banking Structure

CONCLUSION ABOUT SBP

Unique Position in our economy
Unique position financial Infrastructure