VIEWS: 21 PAGES: 16 POSTED ON: 4/16/2012
“Banker is a man who lends you an umbrella when the weather is fair and takes it away when it rains” Dr. Aneel SALMAN Department of Management Sciences and Humanities GIK Institute of Engineering Sciences and Technology Definitions • Bank is a financial institution which is engaged in borrowing and lending of money. • Central bank is the head, the leader and the supervisor of banking and monetary system of a country. • Commercial banks are the institutions which perform general banking functions. They receive deposits, advance loans and create credit. Role of Central Bank • Important for all types of organization whether it is a • Commercial organization • Non commercial organization • Banking sector • Non banking sector Contemporary Thinking on Central Bank Objectives • macroeconomic stability, relating to domestic inflation and the foreign exchange rate • longer term considerations of financial sector development • immediate issues of the sound management and financial health of financial institutions History • Before independence on 14 August 1947, the Reserve Bank of India (central bank of India) was the central bank for what is now Pakistan. • On 30 December 1948 the British Government's commission distributed the Bank of India's reserves between Pakistan and India - 30 percent for Pakistan and 70 percent for India. • The losses incurred in the transition to independence were taken from Pakistan's share (a total of 230 million). In May, 1948, Mr. Jinnah took steps to establish the SBP immediately. These were implemented in June 1948, and the State Bank of Pakistan commenced operation on July 1, 1948. Management Structure • President of Pakistan appoint the Governor of State Bank of Pakistan. • Because SBP is an autonomous body, decision has to be taken independently. • The principal officer of the SBP is the Governor. Yaseen Anwar is the new Governor of the State Bank of Pakistan Functions of State Bank (Traditional) • Note Issuing Agency • Banker to the government • Bankers Bank • Lender of last resort • Clearing house • Custodian of money market • Controller of foreign exchange • National debt • In “developmental” activities, financial institutions and mechanisms are used as tools by central banks to achieve broader development objectives. • In “promotional” activities, central banks pursue financial development through catalytic initiatives, avoiding substantial commitments of resources Functions of State Bank (Development) • Monetization of subsistence sector • Assistance to existing credit institutions • Creation of new credit institutions • Provision of credit for development • Functions related to commercial banks • To act as financial intermediary Instruments of SBP MP • Bank Rate • Open Market Operations (OMO) • Variable Reserve Requirement • Selective Credit Control – Margin on security Purchases – Change in amount of down payment and period of repayment – Different rates from different sectors – Import Pre-deposit requirement – Margin on Letter of Credit L/C – Different Reserve Requirements on different deposits – Credit Rationing Instruments of SBP MP • Liquidity Ratio • Credit Deposit Ratio • Moral Persuasion Capital Market • Long term financial instruments which usually mature in more than one year are traded • Allocation of saving into productive uses • Stock- partial ownership in a big firm and is a claim to the profits of that firm • Stock Exchange • Securities and exchange commission of Pakistan Stock Exchange • Market where shares, securities, bonds and debentures are bought and sold. • Agency for channeling the savings of people to industrial and commercial enterprises • Barometer to determine the health of the business and industry • Broad basing of ownership of financial assets and reallocation of funds among corporations and sectors Specialized Credit Institutions in Pakistan • Pakistan Industrial Credit and Investment Corporation (PICIC) • Industrial Development bank of Pakistan (IDBP) • Agricultural Development Bank of Pakistan (ADBP) • Investment Corporation of Pakistan (ICP) • Small Business Finance Corporation (SBFC) • House Building Finance Corporation (HBFC) • National Development Finance Corporation (NDFC) • Equity Participation Fund • National Investment Trust (NIT) Scheduled Banks/DFIs I. Public Sector Banks II. Private Sector Banks III. Specialized Banks IV. Foreign Banks V. Micro Finance Banks VI. Development Finance Institutions
"Banking in Pakistan pdf"