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Banking in Pakistan pdf


									  “Banker is a man who lends you
  an umbrella when the weather is
    fair and takes it away when it

                   Dr. Aneel SALMAN
Department of Management Sciences and Humanities
GIK Institute of Engineering Sciences and Technology
• Bank is a financial institution which is
  engaged in borrowing and lending of
• 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
• 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
•   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
•   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
            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 Industrial Credit and Investment
  Corporation (PICIC)
• Industrial Development bank of Pakistan (IDBP)
• Agricultural Development Bank of Pakistan
• Investment Corporation of Pakistan (ICP)
• Small Business Finance Corporation (SBFC)
• House Building Finance Corporation (HBFC)
• National Development Finance Corporation
• 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

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