A CONCISED PRESENTATION

ON

MONEY AND

BANKING

Submitted to Professor Shahzaib Khan

OUR TEAM Muhammad Ali Danish Sharjeel Naveed Sana Hussain Ghayas Hasan Muhammad Ali Awan

Submitted to Professor Shahzaib Khan

TOPICS TO BE COVERED :
1.What is Money and its characteristics? 2. 3.Types of Money? 4. 5.Financial institutions and their services. 6. 7.How money is measured? 8. 9.State Bank of Pakistan and its functions. 10. 11.Reasons for the change in the financial industry. 12. 13.Identification of the concepts of international financial system. 14. 15.International Financial Institutions related to Pakistan. 16. 17.Question and Answer Session. 18. 19. 20. Submitted to Professor Shahzaib Khan 21.

What is money?
M o n e y is any object or record , that is generally accepted as p a ym e n t fo r g o o d s a n d se rvi s a n d re p a ym e n t o f d e b ts i a g i n co u n try. ce n ve

CHARACTERISTICS OF MONEY :
1 .) Po rta b i i : I m e a n s th a t th e m o n e y sh o u l b e e a sy to l ty t d h a n d l a n d lg h t e i i w e i h t. n g 2 .) D i si i i : I sh o u l b e e a si y d i d e d i to sm a l e r p a rts, vi b l ty t d l vi n l h a vi g fi d n xe va l e . u 3 .) D u ra b i i : M o n e y sh o u l h a ve q u a l ty th a t i n e i e r l ty d i t th sh o u l d i o r d e sp o i , a n d i sp o i e d i sh o u l b e re p l ce d e a si y. l f l t d a l Submitted to 4 .) S ta b i i : M o n e y sh oProfessor Shahzaib Khanl va l e , a n d sh o u l n o t4 l ty u l h a ve a sta b e d u d fl ctu a te u

Types of Money in Pakistan?

On the basis of its course of evolution, the money is generally classified under three main heads they are: Metallic money Standard money Token money Bank money Cheque Bill of exchange Draft Paper money Representative paper money Convertible paper money Inconvertible paper money
Submitted to Professor Shahzaib Khan

COMMERCIAL BANKS

FINA NCIA L INST ITUT IONS AND THEI R SERV ICES

is a public limited company set under companies Act 1984. Its services include; Accepting deposits and advancing loans Transfer of money Issue if credit money Financing foreign trade Investment of funds Foreign exchange dealing

STATE BANK OF PAKISTAN

serves as the Central Bank established on 1st July 1948 Its services include; Note issuing agency Bankers bank Banker to the state Clearing house Lender of last resort Controller of credit

MUTUAL FUNDS

is a the financial institutions whose depositors are owners sharing in its profit. Its services include; Offers deposits accounts such as money market accounts

NATIONAL SAVINGS

NON DEPOSIT INSTITUTIONS: It comprise of

pension funds, insurance companies, finance companies and securities investment dealers(brokers). It services include; Depositing money Providing interest on deposits Making loans

are the intuitions who deposit and make loans primarily for middle class society. Its services include; Encourage saving habits Provide financing for homes CREDIT UNIONS are non profit, cooperative financial institutions owned and run by its members usually employees. Its services include; Provide members with a safe place to save Provide members with a safe place to borrow

Submitted to Professor Shahzaib Khan

How money is measured?

Banks are a financial institution whose primary focus is to make money. The supply or creation of money consists of :

M1 + M2 = M3(Total Money Supply in the economy)

The Spendable Money Supply M1 : PLUS The convertible money supply M2 EQUALS Total Money supply in the Economy M3

Submitted to Professor Shahzaib Khan

The spendable money M1 :

q It is measure of money supply that includes only the most liquid(spendable) q Consists of Currency + current deposits at banks.

The Convertible Money M2 :

q Consists of all components of M1 + the forms of money that can be easily converted into spendable forms. q Examples include: 1.) TIME DEPOSITS (like Certificates of deposits issued by bank DSCs, SSCs; Term deposits with bank.) 2.) MONEY MUTUAL MARKET FUNDS where short term, low risk financial securities are purchased, like, HBL mutual fund etc.

Submitted to Professor Shahzaib Khan

State Bank Of Pakistan

q The State Bank of Pakistan is fulfilling the role of Federal Reserve System. q Federal Reserve system controls the money supply in an economy.

FUNCTIONS OF STATE BANK OF PAKISTAN

Banker to the Government:

a.) Receives deposits (taxes, fees, fines, etc.) on behalf of the federal government. b.) Disburses payments (tax refunds, interest, etc.)on behalf of the federal government. c.) Manages the national debtbuys, sells, and cashes Submitted to Professor Shahzaib Khan 9 government. securities and pay interest/profit on them.

Banker to Banks : As banker to the scheduled banks, SBP a. Holds deposits made by them as a part of their required reserves5% at this time. b. Lends them funds as a lender of the last resort to meet their pressing needs by discounting their bills of exchange and other.

Submitted to Professor Shahzaib Khan

Issuer of Paper Currency Exchange Rate Management and Balance of Payment . To Formulate and Implement the Monetary Policy Changing the monetary base . Exchange Rate Management and Balance of Payment Acts as a Clearing House
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CHANGE IN THE FINANCIAL INDUSTRY :

Change in the financial industry comes because of THREE reasons, mainly:

1. Deregulation of banks.

2.

2.

Impact of electronic technologies: a. Introduction of debit cards. b. Credit cards. c. E-cash d. Mobile banking

3.

Interstate banking.
Submitted to Professor Shahzaib Khan

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IDENTIFYING THE CONCEPTS OF INTERNATIONAL FINANCIAL SYSTEM

EXCHANGE RATE: The price at which one currency is bought and sold for another. Example: $1 = Rs86/= 1 = Rs147/= EXCHANGE RATE SYSTEMS IN PAKISTAN: 1. Fixed exchange rate system Government has the right to control the exchange rate 2. Floating exchange rate system Market forces of supply and demand for the foreign exchange. 3. Managed floating system Floatation until the determination of exchanges rate. Intervention of the government to control.

Submitted to Professor Shahzaib Khan

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INTERNATIONAL FINANCIAL INSTITUTIONS RELATED TO THE PAKISTAN S ECONOMY

1.INTERNATIONAL MONETARY FUND (IMF) Formed in bretton wood in 1944 Exchange stability Balanced demand and supply forces 3.ASIAN DEVELOPMENT BANK (ADB) Established in 4th decd 1966 To promote investment in the country 2.WORLD BANK Setup in 1947 To make loans to the developing countries

4.ISLAMIC DEVELOPMENT BANK Formed in 1975 at Jaddeh Harmonious and balanced development of member countries

5.MULTINATIONAL CORPORATIONS (MNCS) owns and controls productive activities

6.INTERNATIONAL FINANCE CORPORATION (IFC) Established in 1956 affiliated organization to World Bank to provide finance for industrial projects to private enterprises in developing countries 13

Submitted to Professor Shahzaib Khan

THANK YOU
Question & Answer Session

Submitted to Professor Shahzaib Khan

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