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Financial Market and Institutions

The document discusses central banks and provides information about the State Bank of Pakistan (SBP). It defines central banks as institutions that manage a state's currency, money supply, and interest rates. The SBP is Pakistan's central bank, established in 1948. As a central bank, the SBP regulates Pakistan's monetary and credit system, handles currency management, and facilitates interbank settlements. It performs both traditional functions like issuing currency as well as developmental functions to achieve macroeconomic goals like developing Pakistan's financial framework and institutions. The document outlines some current challenges for Pakistan like economic slowdown due to the coronavirus pandemic and outlines relief measures the SBP can provide like increasing borrowing limits and deferring loan principal payments.

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Usama Qureshi
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55 views18 pages

Financial Market and Institutions

The document discusses central banks and provides information about the State Bank of Pakistan (SBP). It defines central banks as institutions that manage a state's currency, money supply, and interest rates. The SBP is Pakistan's central bank, established in 1948. As a central bank, the SBP regulates Pakistan's monetary and credit system, handles currency management, and facilitates interbank settlements. It performs both traditional functions like issuing currency as well as developmental functions to achieve macroeconomic goals like developing Pakistan's financial framework and institutions. The document outlines some current challenges for Pakistan like economic slowdown due to the coronavirus pandemic and outlines relief measures the SBP can provide like increasing borrowing limits and deferring loan principal payments.

Uploaded by

Usama Qureshi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Financial market and

institutions
Central
Bank
What is central bank

▪ A central bank, reserve bank, or monetary authority is an institution that manages


the currency, money supply, and interest rates of a state or formal monetary
union, and oversees their commercial banking system.

▪ The bank which is responsible for the financial and economical stability of country.

▪ It control other banks, inflation and formulates its economic and fiscal policies.

▪ It advises the government on foreign trade, development of financial and capital


market, balance of trade, foreign aids etc
Cont’d

 the central bank is usually responsible for the


formulation of monetary policy and the regulation of
member banks
 A central bank is a financial institution given privileged

control over the production and distribution of money


and credit for a nation
Objectives of central bank

▪ The main objective performed by a central bank is ensuring financial stability


▪ other objectives such as controlling inflation, unemployment, interest rates, or
exchanges rates
▪ Regulating the economic activities- facilities flow of funds
▪ Formulate and conduct monetary policy to generate maximum economic
benefits
▪ Enhance foreign exchange earnings through favourable promotion of foreign
trade
▪ Retain balanced growth, stabilize the price level and control inflation
Functions of central bank

▪ Bank of Issue
▪ Banker to the government
▪ Clearing House
▪ Controller of Credit
▪ Protection of Depositor’s Interest.
Roles of central bank

▪ Measuring leading economic variables


▪ Money supply and creation
▪ Foreign currency management
▪ Effective debt management
▪ Valuable advise to the government
▪ Control and supervisor of financial institutions
Policy Instruments

▪ Tools to achieve Central bank’s monetary policy goals

▪ Main monetary policy instruments are


– Interest rates

– Open market operations

– Reserve requirements

– Capital requirements
State bank of Pakistan
History of SBP

▪ Before independence on 14 August 1947, during the British colonial era, the Reserve


Bank of India was the central bank for both India and Pakistan

▪ In May 1948 Muhammad Ali Jinnah (Founder of Pakistan) took steps to establish
the State Bank of Pakistan immediately

▪ These were implemented in June 1948, and the State Bank of Pakistan commenced


operation on July 1, 1948
State bank of Pakistan

▪ The State Bank of Pakistan (SBP) is the central bank of Pakistan

▪ SBP is incorporated under the State Bank of Pakistan Act, 1956

▪ The SBP Act mandates the Bank to regulate the monetary and credit system of Pakistan

▪ SBP in performing functions such as handling of currency and credit management, facilitating
the inter-bank settlement system, and sale/purchase of savings instruments

▪ State Bank of Pakistan performs both the traditional and developmental functions to achieve
macro-economic goals
Traditional and non traditional functions of SDP

State Bank of Pakistan performs both the traditional and non traditional functions

▪ The traditional functions, which are generally performed by central banks almost all over
the world, may be classified into two groups:

i. Primary functions

ii. Secondary functions

▪ The non-traditional or promotional functions, performed by the State Bank include


development of financial framework, institutionalization of savings and investment,
provision of training facilities to bankers, and provision of credit to priority sectors
Mission statement of SBP

▪ To provide reliable banking services to Government, financial institutions, public


and to act as an operational arm of state bank of Pakistan.
Vision statement of SBP

▪ Our vision is to develop the SBP into a strong and dynamic


institution, equipped with an efficient and professional human
resource base, having the requisite technology and fully capable of
providing quality service to stakeholders, while complementing the
state bank of Pakistan in achieving its objectives
Current challenges

▪ Corona virus has resulted in the slowdown of the business


▪ Economy has started shirking
▪ Households income reduced
▪ Large number of job losses are on its way
▪ Both consumers and businesses will be hit hard
▪ Paying back existing loans is going to be difficult
Relief package for consumers

▪ Increase in borrowing limit for consumer looking for loans

▪ Increase in debt burden ratio from 50% to 60% of take home income

▪ Principal loan amount can be differed for 1 year without any fee
Thank You

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