Role of the State Bank of Pakistan in Pakistan economy and banking

Citation

Amin, Hasnain. (2018). Role of the State Bank of Pakistan in Pakistan economy and banking. (Independent study, Master of Business Administration). Bangkok: Siam University.

Abstract

The “State Bank of Pakistan” is the central bank of Pakistan that has contributed to the development of the economy of the country. The State Bank of Pakistan’s role in the management of financial systems of the country is vital. The basic features of State Bank of Pakistan is to prepare the monetary policy of the government of Pakistan, and organization,  management of the entre economic, banking, and financial systems. Further State Bank of Pakistan also control all financial matters of the government of Pakistan such as  control the foreign reserve of the country, currency rate, currency supply in the open market, etc.

State Bank of Pakistan also established several financial institutes to improve the performance of financial and economic matters of Pakistan. For facilitation of government and general consumers, SBP establishes NBP (National Bank of Pakistan). It is the largest commercial bank of Pakistan, and it is an agent to SBP that handles treasury transactions for the government of Pakistan. The government of Pakistan established two banks under SBP for the promotion of the agriculture sector and the industry sector, Agriculture Development Bank of Pakistan (ADBP) Industrial Development Bank of Pakistan (IDBP). Both banks give soft loans to consumers for the development of the agriculture and industrial sectors.

Further The State Bank of Pakistan promotes the Islamic mode of the banking system in the country because it was a public demand to the government of Pakistan. For this purpose, SBP gave the order to the commercial bank that they establish a separate counter for consumers if they want to deposit in an Islamic mode of investment then, they can do this easily.

For the development of export, SBP makes possible for exporters to get easy foreign remittance in the country without any hurdles; for the encouragement of exporter State Bank of Pakistan give incentives to exporters with the understanding of central government of Pakistan. On another hand, SBP makes such rule and regulations to discouraged unnecessary import from foreign country, particularly luxury goods and services.

The State Bank of Pakistan’ role in the controlling of inflation in the county is very important and essential. For this purpose, SBP use the method of open market operation techniques, such as control the currency circulation in the country, fixed rate of interest, fix the foreign exchange rate and control the banking loans in the country.

For the management of whole systems of economy, SBP established almost 33 departments. The important departments of the bank are as follows: banking policy & financial regulation department, exchange policy department, banking inspection department, financial stability department, Islamic banking department, risk management department, monetary management department, HR department, IT department and legal service department. The Head of SBP is called Governor, with three deputy governors that work in different sectors of the economy. There is also the central board of governors working under the Governor of State Bank of Pakistan.

As per survey report, which is dependent on public opinion, the majority of people were satisfied with the role of State Bank of Pakistan in the economy of the country, particularly in the reference of monitory policy, organization& management, and controlling.

Keywords:  State Bank of Pakistan, financial systems, commercial bank.

Role of the State Bank of Pakistan in Pakistan economy and banking

International Master in Business Administration (IMBA), Siam University, Bangkok, Thailand