REGION C – ASIA
THE SINKING OF THE TITANIC
(April 14-15, 1912 – North Atlantic Ocean)
The State Bank
ROTHSCHILD OWNED & CONTROLLED CENTRAL BANK
The Official Story
THE STATE BANK OF PAKISTAN
The State Bank of Pakistan (SBP) is the central bank of Pakistan. Its constitution, as originally laid down in the State Bank of Pakistan Order 1948, remained basically unchanged until January 1, 1974, when the bank was nationalized and the scope of its functions was considerably enlarged. The State Bank of Pakistan Act 1956, with subsequent amendments, forms the basis of its operations today. The headquarters are located in the financial capital of Pakistan, Karachi. The bank has a fully owned subsidiary with the name SBP Banking Services Corporation (SBP-BSC), the operational arm of the central bank with branch offices in 16 cities across Pakistan, including the capital city Islamabad and the four provincial capitals. The State Bank of Pakistan has other fully owned subsidiaries as well: National Institute of Banking and Finance (NIBAF), the training arm of the bank providing training to commercial banks; the Deposit Protection Corporation (DPC); and ownership of Pakistan Security Printing Corporation (PSPC).
Before independence on 14 August 1947, during the British colonial era, the Reserve Bank of India was the central bank for the then undivided subcontinent. On the 30th of December 1948 the British Government’s commission distributed the Reserve Bank of India’s reserves between Pakistan and India—30 percent (750 M gold) for Pakistan and 70 percent for India.
The losses incurred in the transition to independence, the small amount taken from Pakistan’s share (a total of 230 million). 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.
Under the State Bank of Pakistan Order 1948, the state bank of Pakistan was charged with the duty to “regulate the issue of bank notes and keeping of reserves with a view to securing monetary stability in Pakistan and generally to operate the currency and credit system of the country to its advantage”.
Initially, a large percent of the state bank was funded by industrial families, who Quaid-e-Azam promoted. They would allot a percentage of their annual profit towards the functioning of the bank. Most notably, the Valika Family would allocate the largest share amongst these families, who also possessed good ties with the Quaid, since September 1947 when the Quaid laid the foundations of the first textile mill of Pakistan, Valika Textile Mills.
A large section of the state bank’s duties was widened when the State Bank of Pakistan Act 1956 was introduced. It required the state bank to “regulate the monetary and credit system of Pakistan and to foster its growth in the best national interest with a view to securing monetary stability and fuller utilization of the country’s productive resources”. In February 1994, the State Bank was given full autonomy, during the financial sector reforms.
On January 21, 1997, this autonomy was further strengthened when the government issued three Amendment Ordinances (which were approved by the Parliament in May 1997). Those included were the State Bank of Pakistan Act, 1956, Banking Companies Ordinance, 1962 and Banks Nationalization Act, 1974. These changes gave full and exclusive authority to the State Bank to regulate the banking sector, to conduct an independent monetary policy and to set a limit on government borrowings from the State Bank of Pakistan. The amendments to the Banks Nationalization Act brought the end of the Pakistan Banking Council (an institution established to look after the affairs of NCBs) and allowed the jobs of the council to be appointed to the Chief Executives, Boards of the Nationalized Commercial Banks (NCBs) and Development Finance Institutions (DFIs). The State Bank having a role in their appointment and removal. The amendments also increased the autonomy and accountability of the chief executives, the Boards of Directors of banks and DFIs.
The State Bank of Pakistan also performs both the traditional and developmental functions to achieve macroeconomic goals. The traditional functions may be classified into two groups: 1) The primary functions including an issue of notes, regulation and supervision of the financial system, bankers’ bank, lender of the last resort, banker to Government, and conduct of monetary policy. 2) The secondary functions including the agency function like management of public debt, management of foreign exchange, etc., and other functions like advising the government on policy matters and maintaining close relationships with international financial institutions.
The non-traditional or promotional functions, performed by the State Bank include the development of a financial framework, institutionalization of savings and investment, provision of training facilities to bankers, and provision of credit to priority sectors. The State Bank also has been playing an active part in the process of Islamization of the banking system.
The Bank is active in promoting financial inclusion policy and is a leading member of the Alliance for Financial Inclusion. It is also one of the original 17 regulatory institutions to make specific national commitments to financial inclusion under the Maya Declaration during the 2011 Global Policy Forum held in Mexico. In 2019, the SBP launched the National Payment Systems Strategy to lay out a framework for Pakistan to foster a modern digital payments infrastructure.
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